Assume that nominal GDP is $2 trillion and the money supply is $400 billion. The velocity of money is __________.

Question

Quizplus · Accepted Answer

The equation of exchange is MV=PQ, where M is the money supply, V is the velocity of money, P is the price level, and Q is the real output. Rearranging the equation,
V = PQ / M 
Nominal GDP (PQ) is $2 trillion and the money supply (M) is $400 billion. Thus, 
V = PQ / M 
V = $2 trillion / $400 billion 
V = 5 
Therefore, the velocity of money is 5.0.

Assume That Nominal GDP Is $2 Trillion and the Money