Question
Consider the equation of exchange, MV = PY, in which velocity, V, is a constant with a value of 2.5. Assume that the economy is
Consider the equation of exchange, MV = PY, in which velocity, V, is a constant with a value of 2.5. Assume that the economy is currently at its potential level of real GDP. Suppose that money supply increases by $10K. Which of the following statements is true?
a.
Velocity increases to 4
b.
Nominal GDP rises by $10K
c.
Real GDP increases by $25K
d.
The price level increases by $25K
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Macroeconomics
Authors: Andrew B. Abel, Ben S. Bernanke, Dean Croushore, Ronald D. Kneebone
6th Canadian Edition
321675606, 978-0321675606
