If the velocity of money is 2 and nominal GDP is $10 trillion, then the money supply is
A) $0.2 trillion.
B) $5 trillion.
C) $8 trillion.
D) $12 trillion.

Question

Quizplus · Accepted Answer

The equation of quantity theory of money is: MV = PY, where M is the money supply, V is the velocity of money, P is the price level, and Y is real GDP. 
Rearranging the equation to solve for M, we get M = PY/V.

Given, V = 2 and PY = nominal GDP = $10 trillion. 
Therefore, M = $10 trillion / 2 = $5 trillion.

Hence, the correct answer is B.

If the Velocity of Money Is 2 and Nominal GDP