Suppose Y = 100, P = 80, and V = 3.2. If Y rises to 105, and the inflation rate is 10 percent, what is the new value of M?
What will be an ideal response?
105 × 88 = 9,240 = M × 3.2. M = 2,887.5. Equivalently, 100 × 80 = M × 3.2, so M = 2,500. Since P × Y rises from 8,000 to 9,240, an increase of 15.5%, M must rise by 15.5% = 2,500 × 1.155 = 2,887.5
You might also like to view...
Refer to Scenario 17.2. The highest level of y* that can be set and still have the high-productivity people choose to meet it is
A) 90. B) 60. C) 30. D) 22.5. E) 15.
A permanent decrease in demand for convenience store services is likely to cause which of the following in the long run?
a. an economic loss for each firm b. a higher price for each firm's output c. fewer firms in the industry d. more firms in the industry e. economic profit for each firm
As firms gain market share, industries become more competitive
Indicate whether the statement is true or false
If the government imposes a price ceiling,
a. producers must charge the ceiling price b. the price offered by producers must be no lower than that ceiling price c. the price offered by producers must be no higher than that ceiling price d. producers would be inclined to increase the quantity supplied e. the market supply curve shifts to the right