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). First, calculate nominal GDP by multiplying real GDP by the GDP deflator (4,359.3 * 325.1 / 100 = 14,168.243). Then, divide nominal GDP by M1 (14,168.243 / 989.5 ≈ 14.32).

In the Second Quarter of 1995, the Following Values Were