If the money supply in an economy equals $1,000 and nominal GDP equals $3,000, 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 = 3,000/1,000 = 3. Therefore, the velocity of money equals 3.

If the Money Supply in an Economy Equals $1,000 and Nominal