-Refer to the above diagram for the market for money.If each dollar held for transactions purposes is spent four times per year on the average,we can infer that the:
A) real GDP is $800.
B) nominal GDP is $800.
C) money supply must be $800.
D) nominal GDP is $1,200.

Question

-Refer to the above diagram for the market for money.If each dollar held for transactions purposes is spent four times per year on the average,we can infer that the:
A) real GDP is $800. 
B) nominal GDP is $800. 
C) money supply must be $800. 
D) nominal GDP is $1,200.

Quizplus · Accepted Answer

The velocity of money is 4, meaning each dollar is spent four times per year. If the money supply is $200, then nominal GDP is calculated as money supply multiplied by velocity, which is $200 * 4 = $800.

-Refer to the Above Diagram for the Market for Money