Question

If real gdp is $4 billion, the price level is 1.25, and the nominal money stock is $500 million, then velocity is

Answer 1

Real GDP G = $4 billion
Price level P = 1.25
Money Supply M = 500 million = 0.5 billion
We have an equation M x V = P x G
=> V = P x G / M
=> V = 1.25 x 4 / 0.5
=> V = 5 / 0.5
So the velocity V = 10