Questions: Assuming the money supply is currently 23,000, the price level is 101, and Real GDP is 13,000: Calculate the Velocity of Money (round answer to the hundredth place) Type your answer... Previous Next

To calculate the Velocity of Money (V), we can use the formula from the Quantity Theory of Money, which is:

\[ V = \frac{P \times Y}{M} \]

where:

• \( P \) is the price level
• \( Y \) is the Real GDP
• \( M \) is the money supply

Given:

• Money supply (\( M \)) = $23,000
• Price level (\( P \)) = 101
• Real GDP (\( Y \)) = $13,000

Substitute the given values into the formula:

\[ V = \frac{101 \times 13,000}{23,000} \]

First, calculate the numerator:

\[ 101 \times 13,000 = 1,313,000 \]

Next, divide by the money supply:

\[ V = \frac{1,313,000}{23,000} \approx 57.09 \]

Therefore, the Velocity of Money is approximately 57.09.