Assume GDP is currently $10,800 billion per year and the quantity of money is $540 billion.
a. What is the velocity of money?
b. The nation collectively holds enough money to finance how many days, worth of GDP expenditure?
Given,
a. Nominal GDP = $10,800 billion
Quantity of money, M = $540 billion
Nominal GDP = Quantity of money * Velocity of money
=> $10,800 billion = $540 billion * V
=> V = $10,800 billion/$540 billion
=> V = 20
Therefore, Velocity of money = 20
b. Daily GDP expenditure = Nominal GDP/365 = $10,800/365 = $29.589 billion
Number of days the GDP expenditure can be financed using the money stock = Quantity of money/Daily GDP expenditure = $540 billion/$29.589 billion = 18.25 days
Ans: 18.25 days
Assume GDP is currently $10,800 billion per year and the quantity of money is $540 billion....
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