Homework #4 *updated*

The 4th homework assignment, currently set to be due on Friday, will be due on Monday. Yeah, I know, its homecoming. But sincerely, you should be able to answer all of these by doing the assigned readings in Chapter 4 of the Mankiw text.

Know these relationships:

Quantity equation: M x V = P x Y

M = money supply
V = velocity
P = price level (not turned into "index form" by being multiplied by 100)
Y = real output (real GDP)

The above can be stated in "percent change form" as:

(%change M) + (%change V) = (%change P) + (%change Y) which means:

monetary growth rate + change in velocity = inflation rate + real GDP growth rate

Fisher equation is

nominal interest rate = real interest rate + inflation rate. You can use algebra to solve for unknowns.

For problem 3, look at the equation of exchange and see what will happen. *update: invoke the "quantity theory" in that Velocity is argued to be constant. That will help you draw the conclusion.*

For problem 4, poke around here.