Problem
1. Consider the following data: The money supply is $1 trillion, the price level equals 2, and real GDP is $5 trillion in base-year dollars. What is the income velocity of money?
2. Consider the data in Problem 16-8. Suppose that the money supply increases by $100 billion and real GDP and the income velocity remain unchanged
a. According to the quantity theory of money and prices, what is the new price level after the increase in the money supply?
b. What is the percentage increase in the money supply?
c. What is the percentage change in the price level?
d. How do the percentage changes in the money supply and price level compare?
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.