Assuming velocity of circulation is constant, a 10 percent increase in the quantity of money leads to a 10 percent increase in nominal GDP in both the short run and the long run.

Question

Quizplus · Accepted Answer

According to the Quantity Theory of Money, if the velocity of money is constant, a change in the money supply leads to a proportional change in nominal GDP.

Assuming Velocity of Circulation Is Constant, a 10 Percent Increase