Fisheria Is a Country in Which the Quantity Theory of Money

question 487

Essay

Fisheria is a country in which the quantity theory of money operates. The country has a constant population, capital stock, and technology. In 2010, real GDP was $300 million, the quantity of money was $60, and the velocity of circulation of money was 10. In 2015, the price level rose by 20 percent.
a) What was the price level in 2014? (The price level is measured by the GDP deflator, which is 100 in the base year. So the price level from the equation of exchange needs to be multiplied by 100 to convert it to the GDP deflator.)
b) What was real GDP in 2015?
c) What was the velocity of circulation in 2015?
d) What was the quantity of money in 2015?

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Definitions:

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