Final answer:
The statement 'Money Supply x velocity = Nominal GDP = Price Level x Real GDP' is true and describes the basic quantity equation of money. It illustrates the direct relationship between money supply and nominal GDP when velocity is constant. Changing velocity affects the predictability of this relationship.
Step-by-step explanation:
The statement, Money Supply x velocity = Nominal GDP = Price Level x Real GDP, is indeed true. This is also known as the basic quantity equation of money, reflecting the relationship between the money supply and a country's economic output. The velocity of money is the frequency at which one unit of currency is used to purchase domestically-produced goods and services within a given time period. Thus, if the velocity is constant, changes in the money supply directly affect nominal GDP.
If the velocity is predictable and constant, changes in the money supply would logically lead to proportional changes in nominal GDP. Conversely, if the velocity changes unpredictably, it complicates the relationship between money supply changes and nominal GDP outcomes. Therefore, the equation holds true and is foundational to understanding the dynamics of money supply, velocity, price levels, and real GDP in macroeconomics.