In year 1, the economy is at full employment and real GDP is $400 million, the GDP deflator is 200 (the price level is 2), and the velocity of circulation is 20. In year 2, the quantity of money...

In year 1, the economy is at full employment

and real GDP is $400 million, the GDP deflator is 200 (the price level is 2), and the velocity

of circulation is 20. In year 2, the quantity of

money increases by 20 percent. If the quantity

theory of money holds, calculate the quantity

of money, the GDP deflator, real GDP, and the

velocity of circulation in year 2.

Mathematical Note (Study Plan 24.MN)