If income is $30 billion, the price level is 3, and the stock of money is $18 billion, what is the velocity of money?
A) 1.4
B) 1.8
C) 5
D) 180

Question

Quizplus · Accepted Answer

The velocity of money is calculated as the ratio of nominal GDP (or income) to the money supply. Here, it is ($30 billion / $18 billion) = 1.67, which is not an option provided. However, if we consider the price level, the calculation does not directly involve the price level in a straightforward manner for velocity. The correct calculation for velocity, given the options, seems to have been misunderstood in the question setup. Typically, velocity = Nominal GDP / Money Supply. Given the options and the typical formula, none directly match the expected calculation, suggesting a possible mistake in the interpretation of the provided options or a calculation error in the question as presented.

If Income Is $30 Billion, the Price Level Is 3