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Q15. In 2004 GDP in the USA was $11 876 billion dollars and in 2005 it was $12 718 billion dollars. The monetary base was $759 billion in 2004 and $787 billion in 2005. (a) Calculate the velocity of the monetary base in 2004 and 2005. The velocity for the monetary base was 15.6 in 2004 and 16.2 in 2005. (b) Calculate seignorage relative to GDP in 2005. AM 787-759 Seignorage was DV 12718 = 0.0022, or approximately 0.2% of GDP. (c) Calculate what seignorage would have been if velocity had remained unchanged between 2004 and 2005. If velocity is constant, seignorage as a percent of GDP is the growth rate of nominal GDP divided by velocity: AM %ANGDP 12 718/11 876 -1 0.0709 PY V 11 876/759 ~0.0045 ~ 0.5% of GDP 15.6 (d) Explain the difference between the results in (b) and (c). Since velocity increased, the monetary base increased less than it would have done if velocity had remained constant. For this reason, seignorage was lower