Discussion on Canadian money supply
Suppose which this yr's money supply is $50 billion, nominal GDP is $1 trillion also real GDP is $500 billion.
a) Illustrate what is the price level? Illustrate what is the velocity of money?
b) Suppose which velocity is constant also the economy's output of goods also services rises by 5 percent every yr. Illustrate what will happen to nominal GDP also the price level next yr if the bank of Canada keeps the money supply constant?
c) Illustrate what money supply should the Bank of Canada set next yr if it wants to keep the price level stable?
d) Illustrate what money supply should the Bank of Canada set next yr if it wants inflation of 10 percent?