In an economy, if the velocity of money is equal to 2, the value of real GDP is equal to $300 million, and the price level is 10, then the value of nominal GDP will be equal to:

Question

Quizplus · Accepted Answer

The equation of exchange is MV = PQ, where M is the money supply, V is the velocity of money, P is the price level, and Q is real GDP. In this case, V = 2, Q = $300 million, and P = 10. So, MV = 2 * $300 million = $600 million. Since PQ = $300 million * 10 = $3 billion, nominal GDP is $600 million / 2 = $3 billion.

In an Economy, If the Velocity of Money Is Equal