Consider a simple economy that produces only pies The following table contains i
ID: 1224370 • Letter: C
Question
Consider a simple economy that produces only pies The following table contains information on the economy's money supply, velocity of money. price level, and output. For example 2011, the money supply was $360. the price of a pie was $9.00 and the economy produced 800 pies. Filly to the missing values in the following table, rounding to the nearest cent when necessary. The money supply grew at a rate of from 2011 to 2012 Since pie output d d rot change from 2011 to 2012 and the velocity of money the charge in the money supply was renewed in change in the price level. The inflation rate from 2011 to 2012 was.Explanation / Answer
Price level in year 2012 = 378 * 9 / 360 = $ 9.45
The money supply grew at a rate = 378 - 360 / 360 = 0.05 i.e., 5 %.
Nominal GDP
Year 2011 = Price * Quantity of Output = 9 * 800 = $ 7200
Year 2012 = Price * Quantity of Output = 9.45 * 800 = $ 7560
Velocity of Money
Year 2011 = GDP / Quantity of Money = 7200 / 360 = 20
Percentage change in price level from Year 2011 to 2012 = 9.45 - 9 / 9 = 0.05 i.e., 5 %.