Real GDP is $2,000 billion,the price level is 120,and the velocity of circulation is 5.Nominal GDP is

Question

Quizplus · Accepted Answer

Nominal GDP is calculated by multiplying real GDP by the price level. Thus, nominal GDP = $2,000 billion x 120 = $240,000 billion. However, we need to adjust for the velocity of circulation, which is the number of times each dollar is used to purchase goods and services in a given year. Since velocity is 5, we divide nominal GDP by 5 to get: $240,000 billion / 5 = $2,400 billion. So, the correct answer is option D.

Real GDP Is $2,000 Billion,the Price Level Is 120,and the Velocity