If the money supply increases while prices and velocity remain constant, real GDP will increase. This is based on the Quantity Theory of Money, which is often expressed with the equation MV = PQ.

Here's the step-by-step explanation:

1. The Quantity Theory of Money equation is MV = PQ, where M is the money supply, V is the velocity of money (how fast money changes hands), P is the price level, and Q is the quantity of goods and services produced (which is equivalent to real GDP).

2. If M (money supply) increases, and V (velocity) and P (price level) remain constant, then Q (real GDP) must increase to balance the equation.

3. Therefore, an increase in the money supply, with constant prices and velocity, will lead to an increase in real GDP.

Question

If the money supply increases while prices and velocity remain constant, real GDP will increase. This is based on the Quantity Theory of Money, which is often expressed with the equation MV = PQ.

Here's the step-by-step explanation:

1. The Quantity Theory of Money equation is MV = PQ, where M is the money supply, V is the velocity of money (how fast money changes hands), P is the price level, and Q is the quantity of goods and services produced (which is equivalent to real GDP).

2. If M (money supply) increases, and V (velocity) and P (price level) remain constant, then Q (real GDP) must increase to balance the equation.

3. Therefore, an increase in the money supply, with constant prices and velocity, will lead to an increase in real GDP.

Knowee AI · Accepted Answer

If the money supply increases while prices and velocity remain constant, real GDP will increase. This is based on the Quantity Theory of Money, which is often expressed with the equation MV = PQ.

Here's the step-by-step explanation:

1. The Quantity Theory of Money equation is MV = PQ, where M is the money supply, V is the velocity of money (how fast money changes hands), P is the price level, and Q is the quantity of goods and services produced (which is equivalent to real GDP).

2. If M (money supply) increases, and V (velocity) and P (price level) remain constant, then Q (real GDP) must increase to balance the equation.

3. Therefore, an increase in the money supply, with constant prices and velocity, will lead to an increase in real GDP.

If the money supply increases, while prices and velocity remain constant, real GDP will:

Question

If the money supply increases, while prices and velocity remain constant, real GDP will:

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