Final answer:
Using the given values in the quantity equation of money (MV = PQ), where M is 20, V is 5, and P is 4, and solving for Q, we find that Q equals 25, which is option A.
Step-by-step explanation:
The student's question involves solving for Q within the Quantity Theory of Money. The basic quantity equation of money is represented as MV = PQ, where M stands for money supply, V for velocity of money, P for the price level, and Q for the quantity of goods and services produced (real GDP).
Step 1. We start by substituting the given values into the quantity equation of money.
- M (money supply) = 20
- V (velocity of money) = 5
- P (price level) = 4
Now, we rearrange the formula to solve for Q:
20 (M) × 5 (V) = 4 (P) × Q
100 = 4Q
Step 2. Divide both sides by 4 to solve for Q:
Q = 100 / 4
Q = 25
Therefore, the value of Q is 25, which corresponds to option A.