Macroeconomics + Economy 2009 Update 18th Edition by Campbell McConnell, Sean Masaki Flynn,Stanley Brue

Exercise 2

KEY QUESTION Suppose that the money supply and the nominal GDP for a hypothetical economy are $96 billion and $336 billion, respectively. What is the velocity of money How will households and businesses react if the central bank reduces the money supply by $20 billion By how much will nominal GDP have to fall to restore equilibrium, according to the monetarist perspective