If the central bank decides to keep the increase in the money supply constant and the velocity of money turns out to be lower than expected,then:

Question

Quizplus · Accepted Answer

If the central bank keeps increasing the money supply but the velocity of money (the rate at which money changes hands in the economy) decreases, it means that each unit of money is being used less frequently to purchase goods and services. This leads to a decrease in aggregate demand and, in turn, a decrease in output and employment.

If the Central Bank Decides to Keep the Increase in the Money