If the amount of money in circulation is $8 billion and the value of total output is $40 billion in an economy, then the:
A) Velocity of money is 5
B) Money supply is $40 billion
C) Level of the price index is 320
D) Equilibrium level of GDP is $320 billion

Question

Quizplus · Accepted Answer

The velocity of money is calculated by dividing the total output by the amount of money in circulation. Therefore, in this case, the velocity of money is 5 (40 billion/8 billion). The other options are not applicable as they are based on incorrect calculations or assumptions.

If the Amount of Money in Circulation Is $8 Billion