If the quantity of output is 200 billion units,actual money balances held by the nonbanking public equals $100 billion and the average price is $20 per unit of national output,then velocity is

Question

Quizplus · Accepted Answer

Velocity of money can be computed using the equation of exchange as:

MV = PQ

Where M is the money supply, V is velocity, P is the price level, and Q is the quantity of output.

Rearranging the above equation, we get:

V= PQ/M

Substituting the given values:

V = (200 billion x $20)/$100 billion
V = 40

Hence, the velocity of money in this scenario is 40. Therefore, the correct answer is (C).

If the Quantity of Output Is 200 Billion Units,actual Money