Consider an economy made up of a butcher and a baker. Each period,
the butcher sells 4 pounds of meat to the baker for $5 each and the baker sells 10 loaves of bread to the butcher also for $2 each.
- The NGDP is 40
-If the money supply is $5, then the velocity is 8
A) Lets call the price level in this case 10, what does that make Y?
B) Imagine the money supply increases to $12. In the long run what would you expect the values of Y,V, and P to be? (Must be numerical answer)
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