Consider the following:
Money supply (M) = $250 billion
Price level (P) = $5
Velocity of Money = 4
a. Compute the nominal GPD and real GDP?
b. Using the quantity of money equation, what happens to the money supply if velocity of money is constant but price level decreases by 3 % and the real GDP increases by 8%?
c. What would the money supply (M) be if velocity of money and real GDP remain constant and price level increases by 20%?