Question

The velocity of money is defined as A) real GDP divided by the money supply. B) nominal GDP divided by the money supply. C) real GDP times the money supply. D) nominal GDP times the money supply.

Answer 1

Answer:

B) nominal GDP divided by the money supply.

Explanation:

Velocity of money calculates the rate of turnover of money. It calculates how fast money changes hands.

Velocity = (price × agregrate output ) / money supply

Velocity = Nominal GDP / Money supply

If velocity is 2, it means the dollar is usually spent two times in purchasing goods and services.