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Chapter 15: Problem 42

If GDP is 1,500 and the money supply is \(400,\) what is velocity?

Short Answer

Expert verified
The velocity of money (V) can be found using the modified formula \(V = \frac{GDP}{M}\) with the given values of Nominal GDP (1,500) and Money Supply (400). Plugging in the values, we get \(V = \frac{1500}{400} = 3.75\). Therefore, the velocity of money is 3.75.

Step by step solution

01

Identify the Given Information

We are given: - Nominal GDP (GDP) = 1,500 - Money Supply (M) = 400 Step 2: Modify the Quantity Equation Formula
02

Modify the Quantity Equation Formula

Since we don't have information about the price level (P) and real GDP (Y), we need to modify the formula for the quantity equation to use only the given information. The modified formula is: \(V = \frac{GDP}{M}\) Step 3: Calculate the Velocity of Money
03

Calculate the Velocity of Money

Using the modified formula, we can find the velocity of money by plugging in the given values: \(V = \frac{1500}{400}\) Step 4: Simplify the Calculation
04

Simplify the Calculation

Now we just need to simplify the calculation to get the final result: \(V = 3.75\) The velocity of money is 3.75.

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