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19 March, 02:56

If real gdp is $4 billion, the price level is 1.25, and the nominal money stock is $500 million, then velocity is

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  1. 19 March, 05:29
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    Real GDP G = $4 billion

    Price level P = 1.25

    Money Supply M = 500 million = 0.5 billion

    We have an equation M x V = P x G

    => V = P x G / M

    => V = 1.25 x 4 / 0.5

    => V = 5 / 0.5

    So the velocity V = 10
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