If V falls faster than M increases:
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 V falls faster than M increases:
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

If V falls faster than M increases, it means there is a decrease in the velocity of money while the money supply is increasing. This is likely to cause a decrease in nominal GDP, as there is a reduction in the number of times money is changing hands in the economy.

If V Falls Faster Than M Increases