Question

Suppose that this year's money supply is $600 billion, nominal gdp is $15 trillion, and real gdp is $3 trillion. the price level is

Answer 1

Nominal GDP = $15 Trillion Real GDP = $3 Trillion M = $600 Billion Having them in billion units, Nominal GDP = $15000 Billions = P x Y Real GDP = $3000 Billions = Y P = P x Y/ Y = 15000/3000 = 5 As we know M x V = P x Y which gives V = (P x Y)/M = 15000/600 = 25.