The velocity of money is equal to
A) P × M / Y.
B) Y × P × M.
C) P × Y / M.
D) P / M × Y.

Name: The velocity of money is equal to A) P × M / Y. B) Y × P × M. C) P × Y / M. D) P / M × Y.
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Question

Quizplus · Accepted Answer

The velocity of money is defined as the rate at which money is exchanged in an economy. It is calculated as the nominal GDP (P × Y, where P is the price level and Y is the real GDP) divided by the money supply (M), hence the correct formula is P × Y / M.

The Velocity of Money Is Equal to