If a constant-growth-rate-of-money policy is to achieve constant growth of nominal GDP,velocity

Question

Quizplus · Accepted Answer

For nominal GDP to grow at a constant rate with a constant-growth-rate-of-money policy, velocity must grow at a steady and predictable rate. This means that the demand for money must increase at a corresponding rate to the growth in money supply. If velocity were to remain constant or, worse, shrink over time, the policy would not achieve the desired outcome of constant nominal GDP growth.

If a Constant-Growth-Rate-Of-Money Policy Is to Achieve Constant Growth of Nominal