If velocity is 6, real output is 10,000, and M is 20,000 what would the price level be? If M increases to 25,000 but V and Y do not change, what happens to the price level? Are the change in the money supply and the change in the price level proportional?
P = MV/Y. With the numbers given, P = 12 . When the money supply increases to 25,000, P increases to 15 . Yes, both the money supply and the price level rise by 25%.
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Answer the following statement true (T) or false (F)
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A. The demand for ferry service would increase. B. There would be a downward movement along the demand curve for transits through the Chunnel. C. The demand for ferry service would decrease. D. There would be an upward movement along the demand curve for transits through the Chunnel.