Question

Suppose nominal GDP is​ $2,000 a year and the quantity of money is​ $400. Then the velocity of circulation equals

Answer 1

Answer: 5

Explanation:

The velocity of circulation is the average number of times that each dollar can be used for the purchase of goods and services in a year.

From the information given in the question, the velocity of circulation will be:

= Nominal GDP / Quantity of money

= $2000 / $400

= 5

Therefore, the velocity of circulation is 5.