An increase in M or an increase in V, other things equal, would definitely increase:
A)the price level.
B)real GDP.
C)nominal GDP.
D)unemployment.

Question

An increase in M or an increase in V, other things equal, would definitely increase:​
A)​the price level.
B)​real GDP.
C)​nominal GDP.
D)​unemployment.

Quizplus · Accepted Answer

An increase in the money supply (M) or the velocity of money (V) will lead to an increase in nominal GDP, as measured in current dollars. Real GDP (B) measures the output of goods and services adjusted for inflation, so changes in the money supply or velocity will not necessarily affect it. The price level (A) may increase due to an increase in the money supply, but not necessarily due to an increase in velocity. Unemployment (D) may be affected by changes in the money supply, but not necessarily by changes in velocity.

An Increase in M or an Increase in V, Other