Question

Suppose that the money supply of a country is $120 billion and the velocity of money is 3.5. The economy's total production quantity is 450 billion units. Instructions: In part a, round your answer to 2 decimal places. In part b, enter your answer as a whole number. a. According to monetarist thought, what will be the average price of a good produced in this economy

Answer 1

$0.93

Step-by-step explanation:

The quantity theory of money was developed by Irving Fisher.

The theory aims to assess how price changes in relation to changes in money supply

Money supply x velocity = price x quantity produced

$120 billion x 3.5 = price x 450

price = 420 / 450 = $0.93