It is difficult to test whether the velocity of money is constant over time because
A) there has been very little variation in the money supply over time.
B) there may be a time lag between a change in the money supply and its effects on nominal GDP.
C) there is only one definition of the money supply.
D) it is difficult to measure the value of nominal GDP over time.

Question

Quizplus · Accepted Answer

The velocity of money is influenced by changes in the money supply, but there is often a time lag between those changes and their effects on nominal GDP, making it difficult to test whether the velocity of money is constant over time. Moreover, there are different definitions of the money supply, which makes it further complicated to study the relationship between the money supply and nominal GDP. However, nominal GDP can be measured relatively easily, so D is not an accurate answer. A is not true because there have been significant variations in the money supply over time.

It Is Difficult to Test Whether the Velocity of Money