Suppose money supply (M) = $500, price level (P) = 2, and real GDP (Y) = $1,000. Calculate the value of velocity using the equation of exchange.

Name: Suppose money supply (M) = $500, price level (P) = 2, and real GDP (Y) = $1,000. Calculate the value of velocity using the equation of exchange.
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Question

Quizplus · Accepted Answer

According to the equation of exchange, MV = PY. Therefore, V = PY/M. Plugging in the values, we get V = (2)(1000)/500 = 4. Therefore, the answer is C.

Suppose Money Supply (M) = $500, Price Level (P) =