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The correct reply is C. nominal GDP would be unchanged; actual GDP would upward jostle via 5 per cent.
What assumptions does the extent principle of cash make?
According to the volume theory of money, the commonplace charge degree of items and services is proportional to the money supply in an economy—assuming the level of actual output is constant and the velocity of money is constant.
What occurs to volume of money when cash provide increases?
Thus, according to the volume theory of money, when the Fed will increase the money supply, the cost of money falls and the price level increases.
according to the assumptions of the quantity theory of money, if the money supply increases by 50 percent, then
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According to the monetary approach of money's underlying assumptions, the nominal GDP would increase by 5% and the nominal GDP would remain unchanged if the money supply increased by 50%.
What is the nominal GDP?
Nominal GDP is the gross domestic product (GDP) which has not been adjusted for inflation. By reflecting the values of all the produced goods and services during the current reporting period, current price estimations of GDP are created.
What precisely is the money quantity theory?
According to the quantity theory of money, an economy's price level and money supply are directly correlated. The price level and the money supply are inversely correlated, meaning that they fluctuate proportionally when one occurs.
How much money is intended by the term?
The total amount of readily usable funds, including as cash, coins, and bank account balances, that are present in the economy at any given time is known as the money supply, or quantity of money. Key economic indicators including nominal gross domestic product (GDP) as well as price levels and the money supply occasionally show a close link.
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