# Suppose that initially the money supply is $1 trillion, the price level equals 3, the real GDP is $5 trillion inbase-year dollars, and income.

Hello, please explain.

Suppose that initially the money supply is $1 trillion, the price level equals 3, the real GDP is $5 trillion in base-year dollars, and income velocity of money is 15. Then the money supply increases by $100 billion, while real GDP and income velocity of money remain unchanged.

**a. **According to the quantity theory of money and prices, calculate the new price level after the increase in money supply:

Thank you!