It is difficult to determine if the velocity of money is constant over time because ?
Correct answer: D. whether velocity is constant or not may depend on how the money supply is measure.
- A. it is difficult to measure the value of nominal GDP over time
- B. there has been very little fluctuation in the money supply over time.
- C. it is difficult to measure the demand for money over time
- D. whether velocity is constant or not may depend on how the money supply is measure.
Explanation
Velocity is calculated as nominal GDP divided by the money supply, so conclusions about whether it is stable can change with the definition used to measure money. Different monetary aggregates can therefore produce different velocity patterns.
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