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- Let’s assume that the nominal Gross Domestic Product, GDP, of a hypothetical country is $36,000 and that the velocity of money of this country is 6. This implies that the money supply, in this country, is:Assume that Jones deposits $500 in currency into her checkable-deposit account in First National Bank. A halfhour later Smith obtains a loan for $750 at this bank. By how much and in what direction has the money supply changed? Explain.What “backs” the money supply in the United States? What determines the value (domestic purchasing power) of money? Who in the United States is responsible for maintaining money’s purchasing power?
- After Grand Nagus Zek hands the throne to Rom to be head of the FerengiAlliance, Rom decides that a more prudent move would be to switch from a commidity based currency (gold pressed latinum) to the Oo-Max, which is a fiat currency. He sets the initial money supply at 2 trillion Oo-Max, and to ensure some degree of monetary stability, wants to let the Ferengi Central Bank aim for a target growth rate of 2% per year. He wants to let the money growth over time subject to the following money supply functionMt = M0eµtwhere Mt is the money supply after t years, M0 is the initial stock of money, ex is the exponential function, µ is the growth rate of money, and t is the number of years after the initial stock of money is set. (b) what is the money supply after 8 years (c)Suppose in the 9th year, the Ferengi Alliance runs into an inflation problem, and they can’t keep it under control. Money growth rises from 2% to 10%. What is the money stock two years after the value you get in part (b) of…After Grand Nagus Zek hands the throne to Rom to be head of the FerengiAlliance, Rom decides that a more prudent move would be to switch from a commidity based currency (gold pressed latinum) to the Oo-Max, which is a fiat currency. He sets the initial money supply at 2 trillion Oo-Max, and to ensure some degree of monetary stability, wants to let the Ferengi Central Bank aim for a target growth rate of 2% per year. He wants to let the money growth over time subject to the following money supply functionMt = M0eµtwhere Mt is the money supply after t years, M0 is the initial stock of money, ex is the exponential function, µ is the growth rate of money, and t is the number of years after the initial stock of money is set. What is the money supply after 5 years?If nominal GDP is $400, real GDP is $200, and the money supply is $100, then what is the price level and the velocity of money? use calculation and draw the curve?
- Based on the equation of exchange, if nominal GDP is $550 billion and the velocity of money is 5, then what is value the money supply?If nominal GDP is $400, real GDP is $200, and the money supply is $100, then what is the price level and the velocity of money? Show the calculation!Carefully explain and show the effect of a decrease in economic activity on the money market. Show and explain the effect of an increased economic activity on the money market.
- In the country Constantania, suppose the velocity of money is always the same. Last year, the money supply was $2 billion and real GDP was $5 billion. This year, the money supply increased by 6 percent, real GDP by 4 percent, and nominal GDP is $6.5 billion. a) Calculate the velocity of money and the price levels in the two years, and then calculate the inflation rate. b) Calculate the inflation rate using the formula AM/M + AV/V = AP/P + AY/Y, where the Greek letter A represents a change and the ratio AM/Mx 100 is the percentage change (or the rate of change) in M. Compare this result with the result you obtained in part a. Why could there be some difference? c) What is the difference between commodity money and fiat money? Why do people accept fiat currency in trade for goods and services?Which of the following will not affect the money market? O a. Money supply O b. Price of one good c. Expansionary monetary policy O d. Contractionary monetary policyYou have been given the banking and financial data in the following table. Your boss wants you to calculate the M1 money supply (using the U.S. laws and regulations) but forgets to tell you which year the data pertain to. You call your boss and she tells you that the data is for 2021. In that case, you calculate the following for your boss: Currency in Circulation $100 Demand Deposits $1,000 Savings Deposits $4,400 Small Time Deposits (Less than $100,000) $2,000 Large Time Deposits (Greater than $100,000) $4,000 Money Market Mutual Funds Deposits Owned by Individuals $1,000 Money Market Mutual Funds Deposits Owned by Institutions $5,000 Total Reserves in the Banking System $2,100 O a. M1 = $1,000 O b. M1 = $1,100 O c. M1 $2,200 = O d. M1 $4,300 O e. M1 $5,500
