Explain what you would do to the money supply in response


Problem

Price stability: Suppose you are the head of the central bank and your mandate is to maintain the price level at a constant value. Explain what you would do to the money supply in response to each of the following events:

(a) Real GDP increases by 4% during a boom.

(b) Real GDP declines by 1% during a recession.

(c) Real GDP is growing at 3% per year.

(d) The velocity of money increases by 2%.

(e) The velocity of money declines by 1%.

The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.

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Macroeconomics: Explain what you would do to the money supply in response
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