If M = 3,000, P = 2, and Y = 6,000, what is velocity?

Question

a.

1
b.

4
c.

1/4
d.

2

Answer 1

To determine the velocity of money, you can use the formula:

\[ V = \frac{PY}{M} \]

where:

• \( V \) is the velocity of money,
• \( P \) is the price level,
• \( Y \) is the real output (GDP),
• \( M \) is the money supply.

Given the values:

• \( M = 3,000 \)
• \( P = 2 \)
• \( Y = 6,000 \)

Now plug in the values into the formula:

\[ V = \frac{(2)(6,000)}{3,000} \]

Calculating the numerator:

\[ 2 \times 6,000 = 12,000 \]

Now plug this into the equation:

\[ V = \frac{12,000}{3,000} \]

Now dividing:

\[ V = 4 \]

So, the velocity of money is:

b. 4