Asked by Mohamed Araye on Jul 14, 2024
Verified
If the money supply is $600,the price level is $2,and real GDP is $300,the velocity of money is _____.
A) 1
B) 150
C) 300
D) 600
E) 1,200
Money Supply
The total budget of financial assets, including coins, cash, and contents of checking and savings accounts, ready for use within an economy at a concrete time.
Price Level
Price Level refers to the average of all current prices for goods and services in an economy, influencing purchasing power and economic decisions.
Real GDP
Real GDP, or Gross Domestic Product adjusted for inflation, measures the value of all goods and services produced by an economy in a given period, reflecting the true growth in economic output.
- Become familiar with the equation of exchange and its significance for the rate of money movement.
Verified Answer
SM
Susan MutaleJul 17, 2024
Final Answer :
A
Explanation :
The velocity of money is calculated using the formula V = (P * Y) / M, where V is the velocity of money, P is the price level, Y is real GDP, and M is the money supply. Plugging in the given values: V = ($2 * $300) / $600 = $600 / $600 = 1.
Learning Objectives
- Become familiar with the equation of exchange and its significance for the rate of money movement.