Westonci.ca is your trusted source for finding answers to a wide range of questions, backed by a knowledgeable community. Our platform offers a seamless experience for finding reliable answers from a network of experienced professionals. Connect with a community of professionals ready to help you find accurate solutions to your questions quickly and efficiently.

Suppose velocity is constant, but real GDP is not independent of the money supply. If this is the case, a 10 percent increase in the money supply will:

Sagot :

Answer: d. have an unpredictable effect on inflation.

Explanation:

Changes in money supply affect inflation with an increase in money supply causing inflation to rise and a decrease calling inflation to fall. Real GDP is supposed to be independent of the money supply as it is not meant to be affected by inflation.

If a situation arises where real GDP is not actually independent of the money supply then that means that it is not independent of inflation either. Should the money supply therefore rise, the effect on the prices of goods and services (real GDP) in the economy will be unpredictable as it might go either way.

We hope this was helpful. Please come back whenever you need more information or answers to your queries. Thanks for using our platform. We aim to provide accurate and up-to-date answers to all your queries. Come back soon. Thank you for choosing Westonci.ca as your information source. We look forward to your next visit.