If nominal GDP is $600 billion and the money supply is $200 billion, the velocity of money is
A) 0.33.
B) 1.2.
C) 3.
D) 12.

Question

Quizplus · Accepted Answer

The velocity of money equation is MV = PY, where M is the money supply, V is the velocity of money, P is the price level, and Y is real GDP. Rearranging the equation, V = PY/M. 
Using the given information, we can find V = (600 billion)/ (200 billion) = 3. Therefore, the velocity of money is 3.

If Nominal GDP Is $600 Billion and the Money Supply