If the money supply is $1,000,the price level is 3,and real income (or output)is $5,000,then the velocity of money is _____.
A)0.2
B)0.6
C)1.67
D)5
E)15

Question

Quizplus · Accepted Answer

The velocity of money is calculated as the ratio of nominal GDP (price level * real income) to the money supply. Here, nominal GDP = 3 * $5,000 = $15,000. The money supply is $1,000. Therefore, the velocity of money = $15,000 / $1,000 = 15.

If the Money Supply Is $1,000,the Price Level Is 3,and