Macroeconomics 12th Edition by Michael Parkin

Exercise 8

In year 1, the economy is at full employment and real GDP is $400 million, the GDP deflator is 200 (the price level is 2), and the velocity of circulation is 20. In year 2, the quantity of money increases by 20 percent. If the quantity theory of money holds, calculate the quantity of money, the GDP deflator, real GDP, and the velocity of circulation in year 2.