If real GDP stays the same but the price level increases:

Question

Quizplus · Accepted Answer

An increase in the price level leads to an increase in nominal GDP. As real GDP stays the same, this means that the increase in nominal GDP is solely due to an increase in prices. According to the quantity theory of money, nominal money demand is directly proportional to nominal GDP. Therefore, if nominal GDP increases due to an increase in prices, nominal money demand must also increase.

If Real GDP Stays the Same but the Price Level