If the velocity of money is 3, nominal GDP is $300 billion, then the supply of money is:
A) $100 billion.
B) $50 billion.
C) $2500 billion.
D) $2 billion.

Question

Quizplus · Accepted Answer

The velocity of money is defined as the rate at which money circulates in the economy and is calculated as nominal GDP divided by the money supply. Given that the velocity of money is 3 and nominal GDP is $300 billion, we can use the formula: Velocity of Money = Nominal GDP / Money Supply. Rearranging this formula to solve for the money supply gives us Money Supply = Nominal GDP / Velocity of Money = $300 billion / 3 = $100 billion.

If the Velocity of Money Is 3, Nominal GDP Is