If nominal GDP is $4,000 billion and the amount of money demanded for transactions purposes is $800 billion, it can generally be concluded that
A) the asset demand for money is $3,200 billion.
B) the total demand for money is $4,800 billion.
C) on average, each dollar will be spent ﬁve times a year.
D) the supply of money needs to be increased to meet the demand.

Question

Quizplus · Accepted Answer

The velocity of money is calculated as nominal GDP divided by the money supply. Here, $4,000 billion / $800 billion = 5, indicating that on average, each dollar is spent five times a year.

If Nominal GDP Is $4,000 Billion and the Amount of Money