The velocity of money ________.
A) represents the average number of times a dollar is spent in a given year
B) provides the link between the money supply and money demand
C) times the money supply should equal real GDP
D) all of the above
E) none of the above

Question

Quizplus · Accepted Answer

The velocity of money represents the average number of times a dollar is spent in a given year. Option B is incorrect as the link between money supply and money demand is determined by interest rates. Option C is incorrect as the equation of exchange states that the product of velocity and money supply equals nominal GDP, not real GDP.

The Velocity of Money ________