The country of Arkanslavia had money supplies of 183 million arkollars in 2010 and 644 million in 2011. They have real output of 791 arkollars in both years. In Arkanslavia velocity was 7 in 2010 but changed to 5 in 2011. What is the difference in the price level between 2011 and 2010?
What formula do i use? im so lost on my hw
To find the difference in the price level between 2011 and 2010 in Arkanslavia, you can use the equation of exchange formula. The equation is as follows:
Money Supply * Velocity = Price Level * Real Output
In this case, we will use the subscripts "2010" and "2011" to denote the corresponding values for each year.
So, for 2010:
183 million arkollars * 7 (velocity) = Price Level (2010) * 791 arkollars
Similarly, for 2011:
644 million arkollars * 5 (velocity) = Price Level (2011) * 791 arkollars
Now, you need to rearrange the equations to solve for the price level in each year.
For the first equation in 2010:
Price Level (2010) = (183 million arkollars * 7) / 791 arkollars
And for the second equation in 2011:
Price Level (2011) = (644 million arkollars * 5) / 791 arkollars
Finally, to find the difference in the price level between 2011 and 2010, subtract the price level in 2010 from the price level in 2011:
Difference in Price Level = Price Level (2011) - Price Level (2010)
You can plug in the values and calculate the difference to find the answer.