Assume that this year's money supply is around $50 billion, nominal GDP is around $1 trillion, and real GDP is around $500 billion.
Q1. Determine the price level? And also find out the velocity of money?
Q2. Assume that the velocity is constant and the economy's output of goods and services increase by 5 percent each year. What will happen to the nominal GDP and the price level next year if the bank of Canada keeps the money supply steady?
Q3. What money supply must the Bank of Canada set next year if it desires to keep the price level stable?
Q4. What money supply must the Bank of Canada set next year if it desires the inflation of 10 percent?