Suppose that the nominal quantity of money is $200 billion and the value of nominal GDP is $1 trillion. It must be the case that
A) the velocity of circulation is 5.
B) the average price paid for a "typical" good is $5.
C) the economy is suffering from inflation.
D) there will be a shortage of money balances in the economy.

Question

Quizplus · Accepted Answer

The velocity of circulation is calculated as nominal GDP divided by the nominal quantity of money, which is $1 trillion / $200 billion = 5.

Suppose That the Nominal Quantity of Money Is $200 Billion