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Chapter 20: Q 4. (page 546)

“If nominal GDP rises, velocity must rise.” Is this statement true, false, or uncertain? Explain your answer.

Short Answer

Expert verified

The given statement is false.

Step by step solution

01

Step 1. Define GDP.

Gross domestic product (GDP) is a monetary measurement of the total value of all final services produced by countries in such a given time period.

02

Step 2. Explanation

The gross domestic product (GDP) is a financial measure of the total value of all final services generated by a country during a specific time period.

Nominal GDP =P×Y

V=P×YM

Increases in nominal gross domestic product can be offset by increases in M, increases in nominal gross domestic product may be insufficient to compensate for this. As a result, no changes in velocity are required.

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Most popular questions from this chapter

What happens to nominal GDP if the money supply grows by 17% but velocity declines by 24%?

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Wikipedia has a detailed account of hyperinflationary episodes in a number of countries throughout history. Go to the page at https://en.wikipedia.org/wiki/ Hyperinflation#Notable_hyperinflationary_episodes. Which of the countries listed had the worst hyperinflationary episode? Which country has the most recent hyperinflationary episode?

Why does the Keynesian view of the demand for money suggest that velocity is unpredictable?
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