In the second quarter of 1995, the following values were observed: real GDP = 4,359.3 billion; GDP Deflator = 325.1; and M₁ = 989.5.What is the value of velocity?

Question

Quizplus · Accepted Answer

Velocity is calculated as nominal GDP divided by the money supply (M₁). Nominal GDP is real GDP multiplied by the GDP Deflator (in this case, 4,359.3 * 325.1). Then, divide this by M₁ (989.5) to find the velocity.

In the Second Quarter of 1995, the Following Values Were