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Calculate what happens to nominal GDP if velocity remains constant at 5 and the money supply increases from ​$350 billion to ​$525 billion. ​Originally, nominal GDP is ​$ nothing trillion. ​(Round your response to two decimal places.​)

Respuesta :

Answer:

The nominal GDP is increased by $0.87 trillion

Explanation:

For computing the changes in nominal GDP, first we have to compute the old GDP and new GDP, the formula is shown below:

Old GDP = Velocity of money × old money supply

               = 5 × $350

               = $1.75 trillion

And, the new GDP equal to

= Velocity of money × old money supply

= 5 × $525

= $2.62 trillion

So, by increasing the money supply from $350 billion to $525 billion, the nominal GDP also increases from $1.75 trillion to $2.62 trillion.

Hence, the nominal GDP is increased by $0.87 trillion

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