Velocity in the country of Shem is always stable.In 2014,the money supply was $200 billion and the GDP price deflator was four times as high as it was in the base year.In 2015,the money supply increased to $240 billion,the price level increased by 15 percent,and nominal GDP equalled $1200 billion.By how much did real GDP increase between 2014 and 2015?
A) 0.45 percent
B) 4.35 percent
C) 7.45 percent
D) 20 percent

Question

Quizplus · Accepted Answer

Real GDP increased by 4.35 percent between 2014 and 2015. This is because the nominal GDP increased by 20 percent, but the price level increased by 15 percent. Therefore, the real GDP increased by 4.35 percent.

Velocity in the Country of Shem Is Always Stable