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Economics
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a. Solve for V:

M * V = P * Y

$115,386 * V = 9.87 * 23,560

b. In the above equation, if M and V each grow by 3%, by what percentage does (P*Y), or nominal GDP, grow?

c. Translate this equation into words (fill in the blanks):

%u2206M/M + %u2206V/V = %u2206P/P + %u2206Y/Y

___________ plus __________ equals ___________ plus ___________

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Related questions

Assume money demand looks like the following: (M/P)d = L(Y, i) = 2Y/(i0.4)

a. Explain transaction demand for money. Does this money demand equation illustrate transaction demand for money? How? Explain.

b. Explain speculative demand for money. Does this money demand equation illustrate speculative demand for money? How? Explain.

c. Derive an expression for the velocity of money. Show your work.

d. If Real GDP grows at rate g, and the nominal interest rate is constant, at what rate will the demand for real money grow? Show work

5. Consider the following simplified AE function: AE 350 0,8 Y 0,1 (MIP) where AE is desired aggregate expenditure, Y is real GDP, M is the private sector's nominal wealth, and P is the price level. Suppose that M is constant and equal to 6,000. a. Explain why the expression for AE above makes sense. Why do M and P enter the AE function b. Fill in the following table:

a. Explain why the expression for AE above makes sense. Why do M and P enter the AE function? b. Fill in the following table: MIP AE c. Plot each of the AE functions-one for each price level on the same scale 45° line diagram d. Compute the level of equilibrium national income for each of the values of P e- Plot the pairs of price level and equilibrium national income on a scale diagram with P on the vertical axis and Y on the horizontal axis.

Consider the following demand equation for money.

(M/P)d = kY

a) In words, explain what the velocity of money is.

b) Let the supply of (real) money be given by M/P. Using the money demand equation, solve for the velocity of money.

c) Suppose that real GDP is expected to grow 3% over the next year and k is constant. What is the expected rate of inflation if the Fed holds the money supply constant?

d) Suppose that the Fed (Federal Reserve) targets inflation to be 2% over the coming year. What should be the targeted growth rate of the money supply?

e) Suppose that growth in real GDP ends up being 1%. Assuming the Fed carries out its open market operations, expecting a growth rate of 3%, what will happen to the rate of inflation?

f) Is there reason to think that demand for money should be a function of the nominal interest rate? Why?

g) Modify the money demand equation that is given to include the nominal interest rate.

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