If the velocity of money is about 1.8 and nominal GDP is $14.4 trillion, what is the money supply?
A)$1.8 trillion
B)$8.0 trillion
C)$14.4 trillion
D)We cannot compute the money supply from the data given.

Question

Quizplus · Accepted Answer

The money supply can be calculated using the formula for the velocity of money: Velocity of Money = Nominal GDP / Money Supply. Rearranging this formula to solve for the money supply gives Money Supply = Nominal GDP / Velocity of Money. Plugging in the given values: Money Supply = $14.4 trillion / 1.8 = $8.0 trillion.

If the Velocity of Money Is About 1