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Dwoods4515
26.11.2019 •
Business
Suppose that the quantity of money in circulation is fixed but the income velocity of money doubles. if real gdp remains at its long-run potential level, what happens to the equilibrium price level?
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Ответ:
The equilibrium price level will double.
Explanation:
Suppose that the economy has a money supply of $4 billion and the income velocity of money is 8, the price level will be 4 and the real GDP is $8 billion. The formula we are using is:
Money supply x velocity = price level x real GDPIf the money supply remains the same ($4 billion), the income velocity of money is 16 (it doubles), and the real GDP is $8 billion, then the price level will be:
$4 x 16 = price level x $8
$64 = price level x $8
price level = $64 / $8 = 8
So the price level has doubled to 8.
Ответ: