Asked by Kayla Nicole on Mar 10, 2024
Verified
According to the quantity theory of money,if velocity of money is constant,a 5 percent increase in money supply will lead to a 0.25 percent increase in nominal GDP.
Quantity Theory of Money
An economic theory that suggests the general price level of goods and services is directly proportional to the amount of money in circulation.
Velocity of Money
How quickly money moves from one exchange to another and the rate of usage of a currency unit within a designated time period.
Money Supply
The full measure of financial assets available within an economy at a specific juncture.
- Assess the effects of variations in the money supply on intended investment and nominal gross domestic product.
- Understand the basic principles of the quantity theory of money and its implications on nominal GDP and real GDP.
Verified Answer
AN
Aliyah NuriddinMar 10, 2024
Final Answer :
False
Explanation :
According to the quantity theory of money, if the velocity of money is constant, a 5 percent increase in money supply would lead to a 5 percent increase in nominal GDP, assuming the real output remains constant.
Learning Objectives
- Assess the effects of variations in the money supply on intended investment and nominal gross domestic product.
- Understand the basic principles of the quantity theory of money and its implications on nominal GDP and real GDP.