Assume that the Fed increases the money supply when there is substantial unemployment in the economy. According to the quantity theory of money, if velocity is constant, then: a. real GDP will remain constant while price level will decrease. b. real GDP will decrease. c. nominal GDP will increase. d. nominal GDP will decrease. e. the price level will decrease.



Answer :

According to the quantity theory of money, if velocity is constant, then nominal GDP will increase.

Define GDP?

Gross domestic product (GDP) is a financial indicator of the market worth of all finished products that nations generate and sell over a given time period. This measurement is frequently changed before it is trusted as an indicator because of how complex and subjective it is.

How does GDP impact a nation?

Gross domestic product (GDP) is used as a stand-in for the economy since it quantifies the whole output produced by the economy, including activities, stability, and growth of products and services. The living standard is based on per capita GDP, which is determined by dividing Gross domestic product by the total population of the nation.

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