Suppose that an economy is characterized by M = $9 trillion V=2 P= base index = 1.0 Instructions: Round your responses t

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Suppose That An Economy Is Characterized By M 9 Trillion V 2 P Base Index 1 0 Instructions Round Your Responses T 1 (33.34 KiB) Viewed 41 times

Suppose that an economy is characterized by M = $9 trillion V=2 P= base index = 1.0 Instructions: Round your responses to two decimal places. If you are entering a decrease, do not include a negative sign (-) with your answer. a. What is the real value of output (Q)? $ trillion Now assume that the Fed decreases the money supply by 20 percent and velocity remains unchanged. b. If the price level remains constant, by how much will real output decrease? trillion c. If, instead, real output is fixed at the natural level of unemployment (= Q from part a), by how much will prices decrease in percentage terms? % d. By how much would Vhave to increase to offset the decrease in M(assuming Q and P did not change)?