Dividing nominal gross domestic product (GDP) by the money supply (M) is a way to obtain the:
A) Velocity of money
B) Monetary multiplier
C) Equation of exchange
D) Monetary rule

Question

Quizplus · Accepted Answer

Dividing nominal GDP by the money supply gives the velocity of money, which measures how frequently money changes hands in the economy. This equation is known as the Quantity Theory of Money and is expressed as MV=PY, where M is the money supply, V is velocity, P is the price level, and Y is real output.

Dividing Nominal Gross Domestic Product (GDP) by the Money Supply