If the growth rate of money is 3% and the growth rate of velocity is 1%, the growth rate ofnominal GDP is:
Question
If the growth rate of money is 3% and the growth rate of velocity is 1%, the growth rate of nominal GDP is:
Solution
The growth rate of nominal GDP can be calculated using the equation of the Quantity Theory of Money, which states that the money supply times the velocity of money equals the nominal GDP. In terms of growth rates, this can be expressed as:
Growth Rate of Nominal GDP = Growth Rate of Money Supply + Growth Rate of Velocity
Given that the growth rate of money is 3% and the growth rate of velocity is 1%, we can substitute these values into the equation:
Growth Rate of Nominal GDP = 3% + 1% = 4%
So, the growth rate of nominal GDP is 4%.
Similar Questions
If the real GDP increases by 4%, the Price level decreases by 1%, and velocity increases by 6%, then, which is the change in the money supply is _____percent
Suppose an economy’s money supply grows by 5% and its real GDP grows at 1%. Assuming the velocity of money remains constant, what is the inflation rate?
If inflation is growing at 4 percent and nominal GDP is growing at 5 percent, what is the economic growth rate?
If the money supply increases, while prices and velocity remain constant, real GDP will:
he population of a town is 5,00,000. The rate of increase is 20% per annum. Find the population at the start of the third year.
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.