From (b), it is evident that that velocity of money is equal to the nominal interest rate. Velocity will, therefore, grow if interest rate also grows. Hence, if interest rate is a constant velocity is also constant. Velocity will, therefore, grow if interest rate also grows.
Money neutrality means that money supply does not affect real variables but only affects the nominal variables. An increase in the money supply will hence have an effect on all prices but not on the real GDP or real prices.
Structural unemployment results from structural changes in the economy that makes employees obsolete. It is a lack of the required type of workers. there is a difference between the skills employers are looking for and the available employee’s skills.
3. Researchers at Purdue have collected data on the number of undergraduate Purdue students either involved in a relationship or uninvolved. Among involved students, 10% experience a breakup of their relationship each month. Among uninvolved students, 5% enter into a relationship every month. Illustrate the flow of students between the two states (involved and uninvolved) using a diagram.