At vero eos et accusamus et iusto odio dignissimos ducimus qui blanditiis praesentium voluptatum deleniti atque corrupti quos dolores et quas molestias excepturi sint occaecati cupiditate non provident, similique sunt in culpa qui officia deserunt mollitia animi, id est laborum et dolorum fuga.
Et harum quidem rerum facilis est et expedita distinctio. Nam libero tempore, cum soluta nobis est eligendi optio cumque nihil impedit quo minus id quod maxime placeat facere possimus, omnis voluptas assumenda est, omnis dolor repellendus.
Itaque earum rerum hic tenetur a sapiente delectus, ut aut reiciendis voluptatibus maiores alias consequatur aut perferendis doloribus asperiores repellat.
Suppose that the nominal money supply equals $2 billion and nominal GDP is $16 billion. Then, according to the equation of exchange, what is the velocity of money?
If the Fed wants to close a recessionary (deflationary) gap (real GDP is less than potential GDP), should it buy or sell government securities? Why?
Second one answer- When the economy is in recessionary gap, the Fed will adopt expansionary monetary policy to increase money supply in the market by buying securities, lowering the reserve rate, and/or decreasing the discount rate.
Not the answer you are looking for? Search for more explanations.
oh!! srry...and yeah exactly that's the answer..
for first one here is the link..
and here the video.. it will help u understand better
It wont let me watch the whole thing :( And I was on that website invetopedia and I didnt see how to solve it
oh!! k :O
anyways so every transaction involves 2 way swap:
the buyer exchange money for goods and seller exchanges goods fro money.. so basic equation is: M*V=P*Y
M=quantity of money, v=velocity ofmoney ,P=avg price level and Y=real GDP
Yes I know that.. But where is nominal money and GDP in the equation? O.o
see money supply is given= 2 billion, real gdp=16 billion, the matter is where is the price level.....! everything else is given
Ohh.. So I can ignore the word nominal.. Okay thank you!