Fill Out the Following Table Using the Quantity Equation

question 143

Essay

Fill out the following table using the quantity equation:
(A)Calculate the growth rate for each of the four variables between 1972 and 1973.
(B)Calculate nominal GDP for 1972 and 1973,and then calculate the growth rate of nominal GDP between 1972 and 1973.Compare this result with the sum of the growth rates of real GDP and the price level between those two years.
(C)The quantity equation in growth rates can be written as Growth in M + growth in V = growth in GDP + growth in P.Does the growth-rate form of the quantity equation work for the period from 1972 through 1973?
(D)Compare the velocity in 1974 with the velocity in 1975.Is this surprising? Explain.

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Definitions:

Balance Sheet

A financial statement that presents a company's assets, liabilities, and shareholders' equity at a specific point in time, providing insights into its financial position.

Inventory

Goods and materials that a business holds for the ultimate goal of resale or production.

Perpetual Inventory System

A method of accounting for inventory that records the sale or purchase of inventory immediately through the use of computerized point-of-sale systems and enterprise asset management software.

Journal Entries

Transactions registered in a ledger that form the basis of all financial reporting and accounting.