In Drewland, the money supply equals $1,000 and nominal GDP equals $5,000, then velocity of money equals

A, 0.2.

B. 2.

C. 5.

D. 50.

E. cannot be determined with the information provided.

Question

Advanced Placement (AP)

Jefferson

25 January, 20:12

In Drewland, the money supply equals $1,000 and nominal GDP equals $5,000, then velocity of money equals

A, 0.2.

B. 2.

C. 5.

D. 50.

E. cannot be determined with the information provided.

+5

Answers (1)

Know the Answer?

Tyson Hunter · Answer 1

Answer: C. 5.

GDP (gross domestic product) is the amount measuring the total economic output of the goods and services of one country. GDP is nominal if there is no inflation adjustment. Assuming that our GDP is nominal:

The formula for GDP is: GDP = Money Supply x Velocity of Money

In our example, GDP=5,000

Money Supply = 1000

We rearrange the formula to get velocity of money (V)

V=GDP/Money Supply

V=5,000/1000

V=5

In Drewland, the money supply equals $1,000 and nominal GDP equals $5,000, then velocity of money equalsA, 0.2.B. 2.C. 5.D. 50.E. cannot be determined with the information provided.

In Drewland, the money supply equals $1,000 and nominal GDP equals $5,000, then velocity of money equals

A, 0.2.

B. 2.

C. 5.

D. 50.

E. cannot be determined with the information provided.