If the money supply increases 10 percent, real GDP rises 3 percent, and the price level...
| If the money supply increases 10 percent, real GDP rises 3 percent, and the price level increases 4 percent, then velocity must: | |||
|
Fall 3 percent (A) Rise 3 percent (B) be constant (C) Rise 7 percent (D) |
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Homework Answers
Ans. Rise 3 percent (B)
Explanation
Money supply growth + Velocity = Real GDP + Price level
change
Velocity = Money supply growth - Real GDP - Price level change = 10
- 3 - 4 = 3
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