If the velocity of money is 4 and the money supply is $16 trillion, then nominal GDP is
A) $64 trillion.
B) $12 trillion.
C) $4 trillion.
D) $0.25 trillion.

Question

Quizplus · Accepted Answer

The equation of the quantity theory of money is MV = PY. Here, M is the money supply, V is the velocity of money, P is the price level, and Y is real GDP. Therefore, nominal GDP (P x Y) can be calculated as M x V. If V is 4 and M is $16 trillion, then nominal GDP would be $64 trillion (16 x 4 = 64). Thus, the correct answer is A).

If the Velocity of Money Is 4 and the Money