Average.2
4. Velocity and the quantity equation
Consider a simple economy that produces only pens. The following table contains information on the economy's money supply, velocity of money, price
level, and output. For example, in 2018, the money supply was $400, the price of a pen was $5.00, and the economy produced 800 pens.
Fill in the missing values in the following table, selecting the answers closest to the values you calculate.
Year
Quantity of Money
(Dollars)
Price Level Quantity of Output
Velocity of Money
(Dollars)
(Pens)
2018
400
5.00
800
2019
404
10
800
The money supply grew at a rate of
from 2018 to 2019. Since pen output did not change from 2018 to 2019 and the velocity of money
2019 was
the change in the money supply was reflected
in changes in the price level. The inflation rate from 2018 to
Nominal GDP
(Dollars)