If there are 100 transactions in a year and the average value of each transaction is $10, then if there is $200 of money in the economy, transactions velocity is times per year.
A)0.2
B)2
C)5
D)10

Question

Quizplus · Accepted Answer

Transactions velocity is calculated by dividing the total amount of money exchanged in the economy (measured in dollars) by the average value of transactions (also measured in dollars). Thus, transactions velocity = Total amount of money / Average value of transactions.

In this case, the total amount of money is given as $200, and the average value of transactions is given as $10. Therefore, we can calculate transactions velocity as follows:

Transactions velocity = $200 / $10 = 20

This means that the money in the economy changes hands 20 times per year. However, the answer choices presented are in terms of decimals, so we need to convert this result:

Transactions velocity = 20 times per year = 20/100 = 0.2 times per year

Therefore, the correct answer is (A) 0.2.

If There Are 100 Transactions in a Year and the Average