Final answer:
The nominal money demand is 1500, the real money demand is 1000, and the velocity is 1.5.
Step-by-step explanation:
To calculate the nominal money demand, real money demand, and velocity, we use the equation M/P = 500 + 0.2V - 1000, where M represents the nominal money demand, P represents the price level, V is the velocity of money, and the real income (Y) plays a part in determining V. Keep in mind that Y is equivalent to real GDP, and P x Y gives the nominal GDP.
Given that P = 1.5, Y = 1500, and i = 0.06 (which we ignore since there's no interest component in the equation), we can firstly find the nominal GDP by multiplying the price level by the real GDP: 1.5 * 1500 = 2250.
To find the velocity (V), we rearrange the formula Velocity = Nominal GDP / Money Supply. Since we have the nominal GDP (2250), we can solve for V by dividing the nominal GDP by the money supply, which is our unknown. So, we set the money demand equation equal to Y and solve for V: 500 + 0.2V - 1000 = 1500, and after rearranging and solving, V = 7500.
Having V, we can then calculate the nominal money demand M by multiplying it with P: M = P * (500 + 0.2 * 7500 - 1000), which simplifies to M = 1.5 * (500 + 1500 - 1000), and thus M = 1500.
The real money demand M/P is simply the nominal money demand divided by the price level: 1500 / 1.5, which equals 1000.
The calculated velocity is the nominal GDP divided by the money supply, which now we know: 2250 / 1500, resulting in a velocity V = 1.5.