Question: 1. The equation of exchange can be used in many ways. Suppose that new oil deposits are discovered and there is no change in the money supply. How will this increase in RGNP affect the economy? Explain your reasoning. (Hint: what assumptions have you made about M, V, and P?)
2. Monetarists and Keynesians differ concerning the importance of interest rates to monetary policy. Why do Keynesians think they are important? Why do monetarists view them as irrelevant? What do you think?