00:01
Hello students, we are given a question here if a velocity and aggregate output remain constant at $5 and $1 ,000 .000 respectively.
00:10
Then what happens to the price level if the money supply declines from $400 billion to $300 billion? so here, first of all, we are supposed to know that there mv is equal to pv.
00:24
Students where v is nothing but equal to the velocity m is the money supply okay and p is nothing but equal to the price level and y is the equilibrium aggregate output so now we can just say that here initially initially what we are given here that the velocity v is given as equals to five dollar and why aggregate output is given as here one thousand billion dollar and here money supply m is nothing but equal to 400 billion dollars so we can find the price level so we will have to put all those values in this equation so m is 400 times v is 5 is equal to p times y's 1 ,000 okay so it should be like the 4 times of 5 to so 20 and there will be 2 0 so 2 000 is equal to it should be like 2 ,000 is equals to 1 ,000 times of p so p is equals to 2 ,000 divided by 1 ,000 students so p will be equal to obviously two so price level so we can say that initially initially price level will be price level was now here we are supposed to know that sorry $2 now here we are supposed to know that what we are given the further data was like the v will be constant $5.
02:01
Y is nothing but equal to again $1 ,000 billion.
02:05
But the money supply m becomes, here we can just say that it is equivalent to $300 billion.
02:14
Okay.
02:15
So we can put here all the values.
02:16
So m v, 300 times v is 5 is equal to p times of y is 1 ,000...