Velocity and the quantity equation
Consider a simple economy that produces only pies. The following table contains information on the economy's money supply, velocity of money, price level, and output. For example, in 2011, the money supply was $320, the price of a pie was $8.00, and the economy produced 600 pies.
Fill in the missing values in the following table, rounding to the nearest cent when necessary.
Quantity of money Price Level
Year (Dollars) Velocity of Money (Dollars) Qnt of output NominalGDP
2011 320 ______ 8.00 600 (75/4,800/71;/5,040)
2012 336 15 (8.40;8;0.56;0.59) 600 (71/4,800/75/5,040)
The money supply grew at a rate of ______% from 2011 to 2012. Since pie output did not change from 2011 to 2012 and the velocity of money (increased/decreased/remained the same) the change in the money supply was reflected (partially/entirely) in changes in the price level. The inflation rate from 2011 to 2012 was ____%.