If income velocity is assumed to be constant, but no other assumptions are made, the level of ______ is determined by M.
A) prices
B) income
C) transactions
D) nominal GDP

Question

Quizplus · Accepted Answer

If income velocity is assumed to be constant and the level of M is known, then nominal GDP can be calculated using the equation MV = Py, where M is the money supply, V is the velocity of money, P is the price level, and y is real GDP. Therefore, the level of nominal GDP (which includes prices, income, and transactions) is determined by M.

If Income Velocity Is Assumed to Be Constant, but No