Suppose that the money stock is $10 billion, each dollar generates $ 5worth of spending, and the NAIRU is 7%. According to the quantity theory of what is nominal GDP (income)
A)$ 350 million
B)$ 70 million
C)$ 35 million
D)$ 50 million

Question

Quizplus · Accepted Answer

According to the quantity theory of money, nominal GDP is calculated by multiplying the money stock by the velocity of money. Here, the money stock is $10 billion and the velocity is 5, so nominal GDP is $10 billion * 5 = $50 billion.

Suppose That the Money Stock Is $10 Billion, Each Dollar