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Chapter 20: Q 4. (page 546)

鈥淚f nominal GDP rises, velocity must rise.鈥� 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脳Y

V=P脳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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