An increase in the money supply, holding all else constant will cause:
A) an increase in the velocity of money.
B) no change to the velocity of GDP.
C) an increase in the velocity of GDP.
D) a decrease in the velocity of money.

Question

Quizplus · Accepted Answer

An increase in the money supply, holding all else constant, typically leads to a decrease in the velocity of money because more money is available to support the same level of economic transactions, reducing the frequency with which each unit of currency is used.

An Increase in the Money Supply, Holding All Else Constant