If an economy produces 3,000 units of output when the price level is $2 and the money supply is $2,000, what is the velocity of money?
A) 2
B) 3
C) 67
D) 150

Question

Quizplus · Accepted Answer

The velocity of money is calculated as the ratio of nominal GDP (price level * quantity of output) to the money supply. Here, nominal GDP is $2 * 3,000 = $6,000, and the money supply is $2,000. Therefore, the velocity of money is $6,000 / $2,000 = 3.

If an Economy Produces 3,000 Units of Output When the Price