If an economy produces 2,500 units of output when the money supply is $500 and the velocity of money is 10, what is the price level?
A) $1
B) $5
C) $2
D) $10

Name: If an economy produces 2,500 units of output when the money supply is $500 and the velocity of money is 10, what is the price level? A) $1 B) $5 C) $2 D) $10
Brand: Quizplus
Rating: 4.8 (43 reviews)

Question

Quizplus · Accepted Answer

Using the equation of exchange (MV=PY), we can determine the price level as follows:
500 x 10 = P x 2,500
5,000 = 2,500P
P = $2

If an Economy Produces 2,500 Units of Output When the Money