Problem
A certain country has a money supply of $50. The velocity of money is 10. The quantity of goods being produced is 400.
i. What is the average price of goods in the store for this country (to two places past the decimal point)? Now the central bank of this country doubles the money supply (an increase of 100%) to $100. Velocity stays the same. The quantity of goods produced rises to 450 goods.
ii. What is the new price level (to two places past the decimal point)?
iii. What is the in?ation rate for this country (to one place past the decimal point)? You answer should be in percent form.