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ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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If nominal GDP is $900 billion and, on average, each dollar is spent three times in the economy over a year, then the quantity of money demanded for transactions purposes will be
Multiple Choice
450
900
2,700
600
300
Transcribed Image Text:If nominal GDP is $900 billion and, on average, each dollar is spent three times in the economy over a year, then the quantity of money demanded for transactions purposes will be Multiple Choice 450 900 2,700 600 300
Expert Solution
Step 1

Velocity of money = GDP/Money Supply

3 = 900/Money Supply

Money Supply = 900/3 = 300

OPTION E

Velocity of money is the rate at which money is exchanged in the economy. 

 

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