If M increases and V decreases:
A)nominal GDP increases.
B)nominal GDP decreases.
C)nominal GDP stays the same.
D)there is an indeterminate effect on nominal GDP.

Question

If M increases and V decreases:​
A)​nominal GDP increases.
B)​nominal GDP decreases.
C)​nominal GDP stays the same.
D)​there is an indeterminate effect on nominal GDP.

Quizplus · Accepted Answer

The equation for nominal GDP is represented by the formula MV = PQ, where M is the money supply, V is the velocity of money, P is the price level, and Q is the quantity of goods and services produced. If M increases and V decreases, the effect on nominal GDP (PQ) cannot be determined without knowing the magnitude of the changes in M and V.

If M Increases and V Decreases:​

If M Increases and V Decreases: