Suppose that velocity is constant and the economy's output of goods and services rises by 5 percent each year. Use this information to answer the questions that follow.If the Fed keeps the money supply constant, the price level will ??? , and nominal GDP will ??? .

If the money supply and velocity of money are constant, then a 5% increase in the real GDP would lead to a 5% decline in the price level. The nominal GDP would fall by 5%.

The market worth of all the finished products and services that nations create and sell in a certain time period is measured in dollars by the gross domestic product (GDP). This measurement is frequently reviewed before being regarded as a valid indicator due to its subjective and complicated character.

However, GDP per capita does not take into account differences in the inflation rates and cost of living between the various nations. For this reason, using a foundation of per capita GDP at buying power parity (PPP) may be more advantageous when comparing standard of living between countries, whereas nominal GDP is more useful when comparing economies on the world market.

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