Question

if nominal gdp is 1800 and the money supply is 450, then what is velocity?
○ 25
○ 4.5
○ 4
○ 22

Explanation:

Step1: Recall the equation of exchange

The equation of exchange is \( MV = PY \), where \( M \) is the money supply, \( V \) is the velocity of money, \( P \) is the price level, and \( PY \) is nominal GDP. We can solve for \( V \) as \( V=\frac{PY}{M} \).

Step2: Substitute the given values

Given that \( PY = 1800 \) (nominal GDP) and \( M = 450 \) (money supply). Then \( V=\frac{1800}{450}\).

Step3: Calculate the value of \( V \)

\( V = 4\)

Answer:

4