To offset the effect of negative growth in money velocity ( $\vec { v }$ ), the central bank should:
A) decrease the growth rate of the money supply.
B) increase the growth rate of the money supply.
C) apply a policy that stabilizes the growth in money velocity.
D) apply a policy that reduces the growth in money velocity.

Question

Quizplus · Accepted Answer

To offset negative growth in money velocity, the central bank should increase the growth rate of the money supply to maintain the same level of economic activity, as money velocity is a component of the equation of exchange (MV=PY).

To Offset the Effect of Negative Growth in Money Velocity v⃗\vec { v }v

To Offset the Effect of Negative Growth in Money Velocity $\vec { v }$