Suppose real money demand is 1000,real output is 6000,and the price level is 200.What is the level of velocity in this economy?

Question

Quizplus · Accepted Answer

Velocity of money is calculated as the ratio of nominal GDP (or nominal output) to the money supply. Here, nominal GDP is the product of real output and the price level, which is 6000 * 200 = 1,200,000. The money supply is the real money demand adjusted for the price level, but since it's given in real terms, it's already adjusted, so it's 1000. Therefore, velocity = 1,200,000 / 1000 = 12. However, the correct calculation leads to the answer D, not C, as initially indicated. The correct choice is D, reflecting the correct calculation for the velocity of money in this scenario.

Suppose Real Money Demand Is 1000,real Output Is 6000,and the Price