00:01
Here we're going to be using the concept of the equation of exchange to answer the question, must velocity rise if nominal gdp rises? so looking at this function right here, which we're probably all familiar with, we see that m right here, this is our money supply, v is our velocity, y, this is going to be our aggregate output.
00:25
So i'm just going to denote that as output for us.
00:29
And p here, this is our price level.
00:35
All right, and if we take this right here, p times y, so price level, times our output, but that gives us on this left -hand side, that is our nominal gdp.
00:46
All right.
00:47
So now that we've identified this, we're told that, really, let's assume that nominal gdp rises.
00:53
So let's take a look at that.
00:55
So assuming that nominal gdp goes up, so that's everything on this left -hand side, must velocity right here also rise? no, not necessarily...