Use the Quantity Theory of Money to Answer the Following

Essay

Use the quantity theory of money to answer the following questions. We know that for 1994 this small nation had the following economic data: Ms = $200 billion, P = 3, and V = 2. (Assume output = income and GDP = P × Q.)
(a) What is income for 1994? What is nominal GDP?
(b) By how much would the money supply need to change if income were $400 billion?
(c) If annual GDP growth is 5%, by how much will the Ms need to change in 1995? (Use the GDP figure from Part (a).)