If the money supply in an economy equals $100 trillion and nominal GDP equals $200 trillion, then according to the equation of exchange, the velocity of money _____

Question

Quizplus · Accepted Answer

According to the equation of exchange, MV = PY, where M is the money supply, V is the velocity of money, P is the price level, and Y is real GDP. Solving for V, we get V = PY/M. Plugging in the given values, we get V = (200 trillion)/(100 trillion) = 2. Therefore, the velocity of money is 2.

If the Money Supply in an Economy Equals $100 Trillion