If real output is $50 billion, the price level is 10, and velocity is 5, what is the stock of money?
A) $1 billion
B) $25 billion
C) $100 billion
D) $2,500 billion

Question

Quizplus · Accepted Answer

The equation of exchange is MV=PY, where M is the stock of money, V is velocity, P is the price level, and Y is real output. Rearranging the equation to solve for M, we get M=PY/V. Plugging in the given values, we get M=(10)*(50 billion)/5 = $100 billion. Thus, the answer is choice C.

If Real Output Is $50 Billion, the Price Level Is