According to the classical economists' equation of exchange if the money supply is $20 million and the total spending is $100 million, then the velocity of money is:
A) 0.5.
B) $5
C) $120 million.
D) 5.

Question

Quizplus · Accepted Answer

The equation of exchange is MV=PT, where 
M = money supply 
V = velocity of money 
P = price level 
T = total transactions or spending.

Rearranging the formula, we get V = T/M.

Substituting the values, we get V = $100 million / $20 million = 5. Therefore, the velocity of money is 5.

The correct answer choice is D.

According to the Classical Economists' Equation of Exchange If the Money