Hbmepage-EC02011 NE x \\ D Pearson MyLab and Mas , Do Homework Do Homework -Moni

Question

Hbmepage-EC02011 NE x D Pearson MyLab and Mas , Do Homework Do Homework -Monica Costa-Nizzi - Google Chrome e Secure I Student/ PlayerHomework.aspx?homeworkId-447636247&questionld;=2&flushedsfalse;&cld-469523; 44 ECO 201-1N2 Homework: Chapter 16 Homework Monica Costa-N1zzi Score: 0 of 1 pt Save 7 of 17 (15 complete) Text Problem 16-8 HW Score: 88.24%, 15 of 17 pts Suppose that initially the money supply is $3 trillion, the income velocity of money is 5, the price level equals 3, and real GOP Is S5 tillion in base-year dollars. Then suppose that the quantity of money in circulation remain fixed but the income velocity of money doubles. E Question Help If real GDP remains at its long-run potential level, calculate the equibrium price level.

Explanation / Answer

MV = PQ

According to the quantity theory of money if velocity doubles the price level will also double so the equilibrium price level now is 6.

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