Asked by Judie Alfaro on Jul 12, 2024
Verified
The equation of exchange states that the quantity of money multiplied by the velocity of money equals:
A) real Gross Domestic Product.
B) the price level.
C) nominal Gross Domestic Product.
D) the turnover rate.
E) the demand for money.
Equation of Exchange
An economic formula representing the relationship between the money supply, the velocity of money, the price level, and the number of transactions in an economy.
Money Supply
The entire stock of money assets in an economy at a specified period.
Velocity of Money
The rate at which money is exchanged in an economy and is used to measure the activity level of economic transactions.
- Master the concepts of the equation of exchange and its influence on the velocity of currency.
Verified Answer
BS
Brandon SauvalJul 17, 2024
Final Answer :
C
Explanation :
The equation of exchange is MV = PQ, where M is the quantity of money, V is the velocity of money, P is the price level, and Q is the quantity of goods and services produced. Solving for PQ, we get PQ = MV. This means that the product of the price level and the quantity of goods and services produced, or nominal GDP, is equal to the product of the quantity of money and the velocity of money.
Learning Objectives
- Master the concepts of the equation of exchange and its influence on the velocity of currency.