The velocity of money.
Answer to Problem 1QQ
Option ‘c’ is the correct answer.
Explanation of Solution
Option (c):
The velocity of money can calculated using the following equation:.
Here,
V is the velocity of money.
P is the price
T is the number of transactions, and
M is the money supply.
Now, substitute the respective values into Equation (1).
Therefore, the velocity of money is 2. Thus, option (c) is correct.
Option (a):
The velocity of money supply can be calculated using the following equation:
Now, substitute the respective values into Equation (1).
Therefore, the velocity of money is 2. Thus, option (a) is incorrect.
Option (b):
The velocity of money supply can be calculated using the following equation:
Now, substitute the respective values into Equation (1).
Therefore, the velocity of money is 2. Thus, option (b) is incorrect.
Option (d):
The velocity of money supply can be calculated using the following equation:
Now, substitute the respective values into Equation (1).
Therefore, the velocity of money is 2. Thus, option (d) is incorrect.
Velocity of money supply: Velocity of money supply indicates that the number of times an unit of money changes hands in a given period of time.
Want to see more full solutions like this?
- If nominal GDP is $400, real GDP is $200, and the money supply is $100, then what is the price level and the velocity of money? use calculation and draw the curve?arrow_forwardIt is not possible for the total value of production to increase unless the money supply also increases. After all, how can the value of the goods and services being bought and sold increase unless there is more money available.explain the assertion using the equation M = money supply, V = velocity of money, P = price level, Y = real GDP.arrow_forwardIf GDP is 1800 and the money supply is 450, what is the velocity of money? Show your work.arrow_forward
- If the GDP price index is 150, real GDP is $10 trillion, and the quantity of money is $5 trillion, what is the velocity of circulation? The velocity of circulation is ____ Thank you!!arrow_forwardIf nominal GDP in an economy is $1500 and the money supply is $500, what is the velocity of money? a. 333 b. 5 c. 3 d. 7500arrow_forwardAn economy is at full employment. The quantity of money is growing at 8.3 percent a year, the nominal interest rate is 9.5 percent a year, real GDP is growing at 5.0 percent a year, and the inflation rate is 3.1 percent a year. What is the change in the velocity of circulation? Why might it be changing? The velocity of circulation is _______. A. increasing by 3.1 percent a year B. decreasing by 0.2 percent a year C. increasing by 0.2 percent a year D. constantarrow_forward
- Suppose that the Price level = 115, Supply of Money = $60 billion, and Real GDP = $12 billion. What does the velocity of money equal? Select one: a. 30 b. 23 c. 20 d. 18 e. 15arrow_forwardIf the GDP price index is 150, real GDP is $10 trillion, and the quantity of money is $5 trillion, what is the velocity of circulation? The velocity of circulation is ____?arrow_forwardIf real GDP is $40 billion, the price level 30, and the velocity of money is 24, what does the supply of money equal? Select one: a. $40 billion b. $50 billion c. $60 billion d. $75 billion e. $80 billionarrow_forward
- An economy is at full employment and real GDP is $1,000 billion. The inflation rate is 3.0 percent a year, the price level is 1.2, and the velocity of circulation is 8.0. What is the quantity of money? The quantity of money is _____ billionarrow_forward1. Let’s consider a hypothetical economy where this year’s money supply is Tk.100, nominal GDP is Tk. 40000 and real GDP is Tk. 5000.a) What does the quantity theory of money say?b) Calculate the price level.c) Calculate the velocity of money.d) Suppose the central bank changes the money supply so that the new money supply is Tk. 500, calculate the newprice level.arrow_forwardIn the long run, the quantity of money in circulation (a) influences real GDP.(b) influences unemployment.(c) influences the velocity of money.(d) all of the above.(e) none of the abovearrow_forward
- Brief Principles of Macroeconomics (MindTap Cours...EconomicsISBN:9781337091985Author:N. Gregory MankiwPublisher:Cengage LearningEssentials of Economics (MindTap Course List)EconomicsISBN:9781337091992Author:N. Gregory MankiwPublisher:Cengage Learning