Suppose velocity is 3,real output is 9000,and the price level is 1.5.What is the level of real money demand in this economy?
A)2000
B)3000
C)6000
D)30,000

Question

Quizplus · Accepted Answer

Real money demand (M/P)^d = (V * Y)/P where V is velocity, Y is real output, and P is the price level.

Thus, (3 * 9000)/1.5 = 18,000.

Therefore, real money demand is (M/P)^d = 18,000. Solving for M, we get M = P * (M/P)^d = 1.5 * 12,000 = 3000.

Therefore, the level of real money demand in this economy is 3000.

Suppose Velocity Is 3,real Output Is 9000,and the Price Level