Assume the money supply is equal to $40b, the velocity of money is constant at 6, and nominal GDP equals $240b. According to the Quantity Theory of Money, by how much will a $10b increase in the money supply change nominal GDP?

Question

BlackTom AI · Accepted Answer

To tackle this, I start by noting the given quantities and the relationship from the Quantity Theory of Money, MV = PY, where P is the price level and Y is real GDP. Here, M = $40b, V = 6, and nominal GDP PY = $240b, which is consistent since 40 × 6 = 240.

Now consider an increase in the money supply by $10b while V remains constant at 6. The new money stock is M' = $50b. Using MV = PY with the same velocity, the new nominal GDP becomes PY' = M' × V = 50 × 6 = $300b.

The change in nominal GDP is PY' − PY = 300 − 240 = $60b.

Option-by-option analysis:
- a. $60b: This matches the calculated change from 240b to 300b using the unchanged velocity, so it is consistent with the Quantity Theory of Money given the new money supply. 
- b. $300b: This would imply the entire $300b is the change, which misinterprets the baseline; the actual change is the difference between post- and pre-change nominal GDP, not the final level alone.
- c. $250b: This would require a final nominal GDP of 490b or a miscalculation of the baseline, which contradicts the given numbers and the formula.
- d. $10b: This would reflect simply the size of the money supply increase without accounting for the multiplier effect of velocity on nominal GDP.
- e. $50b: This suggests the change equaled the increase in M alone, ignoring the velocity of money; the product MV shows that the impact on PY is greater than the raw change in M when V is constant.

In summary, applying the equation with the new money supply and unchanged velocity yields a $60b rise in nominal GDP, which aligns with option a and contradicts the other options through straightforward arithmetic and the core idea of the money–income channel in the Quantity Theory.

Assume the money supply is equal to $40b, the velocity of money is constant at 6, and nominal GDP equals $240b. According to the Quantity Theory of Money, by how much will a $10b increase in the money supply change nominal GDP?单项选择题

类似问题

Which ONE of the following thalamic nuclei is targeted by the trigeminothalamic tract?

Which ONE of the following is disinhibited in the direct pathway of the basal ganglia motor loop

30. What is the main purpose of the lecture?

Section FChoose a, b or c as the best answer.29. Which statement is the speaker most likely to agree with?

28. 15-minute neighbourhoods provide residents with inexpensive ____ .

27. ____ % of global car ownership is in the U.S.A.

26. ____ % of American drivers use their cars for all journeys.

Section FQuestions 25 – 28. Complete the following sentences with ONE WORD OR A NUMBER from the lecture. 25. American ____ have built more car spaces than is legally required.

更多留学生实用工具

智能学习助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单