If nominal GDP is $5 trillion and velocity is 5, then

Question

Quizplus · Accepted Answer

The velocity of money is defined as the rate at which money circulates, changes hands, or turns over in an economy in a given period. It is calculated as the ratio of nominal GDP to the money supply. Given that the nominal GDP is $5 trillion and the velocity is 5, we can calculate the money supply (actual money balances held by the nonbanking public) as $5 trillion / 5 = $1 trillion. Choices C and D are incorrect because they involve real GDP, which cannot be determined from the information given about nominal GDP and velocity alone.

If Nominal GDP Is $5 Trillion and Velocity Is 5