The velocity of money is 3. If nominal GDP is $1,500 billion then the stock of money is
A) $300 billion.
B) $500 billion.
C) $4,500 billion.
D) $7,500 billion.

Question

Quizplus · Accepted Answer

The equation for the quantity theory of money is M x V = P x Y, where M is the stock of money, V is the velocity of money, P is the price level, and Y is real GDP. Solving for M, we get M = (P x Y) / V. Plugging in the given values, we get M = (1,500 billion) / 3 = 500 billion. Therefore the correct answer is B, $500 billion.

The Velocity of Money Is 3