Respuesta :
In the constant velocity of money, in the short run, a 5 percent increase in money supply will translate to a 5 percent increase in nominal gross domestic product.
What is nominal gross domestic product?
Nominal gross domestic product (GDP) is a size of financial output that does not modify for inflation.
As we know, the equation for the quantity:
M×V = P×Y
Here M is the money supply,
V is the velocity
P is the price level and
Y is the real GDP
∴ P×Y = Nominal GDP
Percent change in M + Percent change in V = Percent change in P×Y
When V is constant, Percent change in V = 0
Percent change in M = Percent change in P×Y = Percent change in Nominal GDP = 5%
Thus, the constant velocity of money, in the short run a 5 percent increase in money supply will translate to a 5 percent increase in nominal gross domestic product.
Learn more about the nominal gross domestic product here:
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