If nominal GDP is $848 billion and the velocity of money is 4, then the
A) money supply is $170 billion.
B) money supply is $212 billion.
C) consumer price index is 340.
D) average level of prices is $170 billion.

Question

Quizplus · Accepted Answer

The equation of quantity theory of money is M * V = P * Y, where M is the money supply, V is the velocity of money, P is the price level, and Y is real GDP. Therefore, M = (P * Y) / V. Plugging in the values given, we get M = (848 billion) / 4 = 212 billion.

If Nominal GDP Is $848 Billion and the Velocity of Money