Using the equation of exchange, if the nominal GDP is $8,000 billion and the money supply is $1,600 billion, then
A) the price level is 5.0.
B) the price level is 0.2.
C) velocity is 5.0.
D) velocity is 0.2.

Question

Quizplus · Accepted Answer

The equation of exchange is MV = PY, where M is the money supply, V is velocity, P is the price level, and Y is real GDP. Given nominal GDP (PY) is $8,000 billion and M is $1,600 billion, V = PY/M = $8,000 billion / $1,600 billion = 5.0.

Using the Equation of Exchange, If the Nominal GDP Is