An increase in the nominal GDP, holding all else constant will cause:
A) an increase in the money supply.
B) a decrease in the velocity of money.
C) a decrease in the money supply.
D) an increase in the velocity of money.

Question

Quizplus · Accepted Answer

An increase in nominal GDP, holding all else constant, means that more goods and services are being produced and sold. This implies an increase in economic activity and consumer spending, which can lead to an increase in the velocity of money. Velocity of money refers to how quickly money is spent in the economy. When more goods and services are being produced and sold, people tend to spend more money, which leads to an increase in the velocity of money.

An Increase in the Nominal GDP, Holding All Else Constant