Question

If the Nominal GDP is $800, the price level 100 , and the money supply is 400 . What is the velocity of Money?

a. 4
b. 200
c. 2
d. 400

Answer 1

The velocity of money, calculated using the formula Nominal GDP divided by Money supply, with given values of $800 for Nominal GDP and 400 for money supply, is 2.

Step-by-step explanation:

If Nominal GDP is $800, the price level is 100, and the money supply is 400, we can calculate the velocity of money using the equation:

Money Supply x Velocity = Nominal GDP

To solve for velocity, we would rearrange the equation as follows:

Velocity = Nominal GDP / Money Supply

Substituting the given numbers into this formula gives us:

Velocity = $800 / 400

Velocity = 2

Therefore, the velocity of money in this case is 2.