If nominal GDP in a year is $15 trillion and the quantity of money is $3 trillion what is the velocity of money?
The velocity of money is 5.
Velocity of money is calculated using the formula: Velocity = Nominal GDP / Quantity of Money. In this case, with a nominal GDP of $15 trillion and a money supply of $3 trillion, the velocity is 15 trillion / 3 trillion = 5.
This choice correctly represents the calculation for velocity of money, as derived from the provided nominal GDP and quantity of money. By dividing $15 trillion by $3 trillion, we arrive at the correct answer of 5.
This choice incorrectly suggests a higher velocity of money than what is calculated. If the velocity were 12, the nominal GDP would need to be $36 trillion (12 times $3 trillion), which is not the case here. Thus, this value does not reflect the relationship between nominal GDP and the quantity of money provided.
Selecting 18 would imply an even larger discrepancy, as this would mean a nominal GDP of $54 trillion (18 times $3 trillion). This is far beyond the given nominal GDP of $15 trillion, highlighting that this option does not hold true according to the provided data.
This choice suggests an extremely high velocity of money, indicating a nominal GDP of $135 trillion (45 times $3 trillion). Such a figure is unrealistic given the provided nominal GDP of $15 trillion, making this option incorrect based on the values presented.
The calculation of the velocity of money reveals crucial insights about economic activity, specifically how quickly money circulates within an economy. With a nominal GDP of $15 trillion and a quantity of money amounting to $3 trillion, the correct velocity of money is 5. All other choices misrepresent this relationship, emphasizing the importance of accurate calculations in economic analysis.
Related Questions
View allWhich organization produces official measures of the total money suppl...
Which of the following was the main result of the McFadden Act of 1927...
Which of the following characteristics refers to large bank holding co...
Financial institutions have an inexpensive source of funds when discou...
Which of the following entities controls monetary policy?
Related Quizzes
View allNo related quizzes currently available.
- ✓ 500+ Practice Questions
- ✓ Detailed Explanations
- ✓ Progress Analytics
- ✓ Exam Simulations