If nominal GDP is $5 trillion and velocity is 20, then

Question

Quizplus · Accepted Answer

To calculate actual money balances held by the nonbanking public, we can use the equation of quantity theory of money: MV = PY. Here, M is the money supply, V is the velocity of money, P is the price level, and Y is the real GDP. Therefore, actual money balances held by the nonbanking public can be calculated as:
M = (PY) / V
If nominal GDP is $5 trillion and velocity is 20, then:
M = ($5 trillion) / 20 = $250 billion
Hence, the correct choice is A.

If Nominal GDP Is $5 Trillion and Velocity Is 20