Velocity in the Country of Nanoland Is Always Stable

question 35

Multiple Choice

Velocity in the country of Nanoland is always stable. In 2018, the money supply was $200 billion and the GDP price deflator was four times as high as it was in the base year. In 2019, the money supply increased to $240 billion, the price level increased by 15 percent, and nominal GDP equalled $1200 billion. By how much did real GDP increase between 2018 and 2019?

• A) 0.45 percent
• B) 4.35 percent
• C) 7.45 percent
• D) 20 percent

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Definitions:

Nasdaq Composite

An index of all the stocks and similar investments listed on the Nasdaq stock market, often used as a benchmark for technology and biotech securities.

Modified Duration

A measure of the sensitivity of the price of a bond or a bond portfolio to a change in interest rates, adjusted for the possibility that the bond may be called before maturity.

Basis Point

A basis point is a unit of measure used in finance to describe the percentage change in the value or rate of a financial instrument, equivalent to 0.01%.

Interest Rates

The fee, shown as a percentage of the principal amount, that a lender imposes on a borrower for the use of assets.