Real GDP is $2,560 billion, the GDP deflator is 125 (a price level of 1.25), and the velocity of circulation is 5. The quantity of money is

Question

Quizplus · Accepted Answer

We can use the quantity equation to find the quantity of money:
M x V = P x Y
where M is the quantity of money, V is the velocity of circulation, P is the price level (GDP deflator), and Y is real GDP.
Plugging in the given values, we get:
M x 5 = 1.25 x 2,560
M = (1.25 x 2,560)/5
M = $640 billion. 
Therefore, the correct answer is E.

Real GDP Is $2,560 Billion, the GDP Deflator Is 125