If nominal GDP is $2,000 billion and the amount of money demanded for transactions purposes is $500 billion, then on average each
dollar will be spent about four times a year.

Question

Quizplus · Accepted Answer

To calculate the velocity of money, we divide nominal GDP by the amount of money demanded for transactions purposes: velocity = GDP/money demanded = $2,000 billion / $500 billion = 4. This means that, on average, each dollar is spent four times during the year.

If Nominal GDP Is $2,000 Billion and the Amount of Money