The money supply in Goldova is $50 billion. Nominal GDP is $400 billion and real GDP is $200 billion. The central bank of Goldova has instituted a policy of zero inflation. Assuming that velocity is stable, if real GDP grows by 10 percent this year, how will the central bank of Goldova change the money supply this year?

Question

Quizplus · Accepted Answer

To maintain zero inflation with a stable velocity, the money supply should grow at the same rate as real GDP, which is 10 percent.

The Money Supply in Goldova Is $50 Billion