Question

What is the velocity of money?

-The rate at which GDP increases in a year.
-The speed of capital accumulation.
-The rate at which money circulates through an economy.
-The rate at which the Federal Reserve increases or decreases the money supply.
-The rate at which the aggregate price level increases.
Suppose the money supply in country X is 44000 and nominal GDP is 88000. Calculate the velocity of money and enter it below. Round your answer to the nearest hundredth.

Answer 1

The rate at which money circulates through an economy.

The velocity of money is 2.

Step-by-step explanation:

The velocity of money is the rate at which money circulates in an economy. It can be defined as the rate at which money is exchanged or is used to purchase goods and services.

It is the number of times money changes hands or number of times money has been used in a given period of time.

According to the equation of exchange,

Nominal output

=
`Money\ supply* Velocity\ of\ money`

Velocity of money

=
`(Nominal\ GDP)/(Velocity\ of\ money)`

=
`(88,000)/(44,000)`

= 2