If the dollars held for transactions purposes are, on the average, spent four times a year for final goods and services, then the quantity of money people will wish to hold for transactions purposes is equal to:

Question

Quizplus · Accepted Answer

If money is spent four times a year, it means the velocity of money is 4. Therefore, the quantity of money people wish to hold for transactions purposes is 1/4 of nominal GDP, or 25 percent of nominal GDP.

If the Dollars Held for Transactions Purposes Are, on the Average