If the money stock grows by 13 percent, and during that same time nominal GDP grows by 3.3 percent, what can we deduce happens to velocity during this period?
A)We cannot tell without knowing what happened to prices.
B)It remained constant.
C)It rose.
D)It fell.

Question

Quizplus · Accepted Answer

Velocity of money fell because the growth rate of the money stock (13%) was much higher than the growth rate of nominal GDP (3.3%), indicating that each unit of money was used less frequently for transactions.

If the Money Stock Grows by 13 Percent, and During