If the central bank increases the money supply by $100 billion and the velocity of money by 3, then the nominal GDP will increase by $300 billion.
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The value of nominal GDP, when the central bank increases the money supply by $100 billion, and the velocity of money is 3, is 300.
What is the equation of exchange?
The equation of exchange can be given as,
[tex]M\times V=P\times Q[/tex]
Here, (M) is the money supplied, (V) is the velocity of the money, (P) is level of price and (Q) is Real GDP.
The central bank increases the money supply by $100 billion, and the velocity of money is 3. Here, we have,
[tex]M=300\\V=3[/tex]
The product of level of price and Real GDP is nominal GDP.
[tex]M\times V=P\times Q\\100\times 3=\text{Nominal GDP}\\\text{Nominal GDP}=300[/tex]
Thus, the value of nominal GDP, when the central bank increases the money supply by $100 billion, and the velocity of money is 3, is 300.
Learn more about the nominal GDP here;
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