I need help on the question posted, please solve for A-G Not sure how to reply t

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I need help on the question posted, please solve for A-G

Not sure how to reply to the comment, but part A is asking to find the velocity of money

Question 5. Money and Inflation. The demand for real money is given by Vi Here Y is real GDP and i is the nominal interest rate measured in percentage points. The future inflation Te is expected to be zero. A) Derive an expression for the velocity of money. Comment on the form of your answer: is velocity a constant number? If not, why not? (B) The nominal money supply is 1500 and the nominal interest rate is 4%. What is nominal GDP? What is the real interest rate? (C) What is the price level if real GDP is 3000? (D) Suppose there are rumors that the future price level will rise by 5%. If lenders wish to charge the (E) How does expected inflation affect the money velocity? Find the new velocity and explain the F) How does expected inflation affect the current price level? Find the new current price level (G) If the central bank wants to keep the price level the same as before, at what level should it set same real interest rate, what nominal interest rate should they set now? direction of change. assuming the money supply and real GDP remain the same. the money supply?

Explanation / Answer

Answer-a

Velocity of money = GDP / money supply

                                    = Y / M

So, velocity of money directly proposal to GDP and indirectly proposal to its M. if GDP and M is constant than velocity will be constant.

Answer-b

Economy will be at equilibrium where demand of money = supply of money

Demand = Y / ?I = supply = 1500

In above equ put I = 4% and find Y

Y = 3000

So, real GDP = 3000

Nominal GDP = real GDP (1 + inflation)

Inflation is zero so nominal GDP = real GDP = 3000

Answer-c

Real GDP = price level * quantity transaction

Price level = price in base year ( 1 + inflation )

Inflation zero so price level will same as before

Answer-d

Raise in price level = inflation = 5%

nominal interest rate = real interest rate + inflation

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