If real output is $20 billion, the price level is 4, and velocity is 2, what is the stock of money?
A) $2.5 billion
B) $10 billion
C) $40 billion
D) $160 billion

Question

Quizplus · Accepted Answer

The quantity theory of money states that MV = PQ, where M is the stock of money, V is velocity, P is the price level, and Q is real output. Substituting the given values, we get 2 * M = 20 * 4, which implies that M = $40 billion.

If Real Output Is $20 Billion, the Price Level Is