Velocity is:

a. Y / (M x P) and increases if dollars are exchanged less frequently.

b. Y / (M x P) and increases if dollars are exchanged more frequently.

c. (P x Y) / M and increases if dollars are exchanged less frequently.

d. (P x Y) / M and increases if dollars are exchanged more frequently.

Question

Physics

Brayan

9 February, 03:03

Velocity is:

a. Y / (M x P) and increases if dollars are exchanged less frequently.

b. Y / (M x P) and increases if dollars are exchanged more frequently.

c. (P x Y) / M and increases if dollars are exchanged less frequently.

d. (P x Y) / M and increases if dollars are exchanged more frequently.

+3

Answers (1)

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Turner Huynh · Answer 1

d

Explanation:

Solution:-

- The Quantity of theory of money states:

M * V = P * Y

Where,

M = Money supply

V = Velocity of money exchange

P = The price level

Y = Real GDP

- By re-arranging the formula and solving for "V" we have:

V = P*Y / M

- The expression on right hand side increases if exchange of dollars increases.

Velocity is:a. Y / (M x P) and increases if dollars are exchanged less frequently.b. Y / (M x P) and increases if dollars are exchanged more frequently.c. (P x Y) / M and increases if dollars are exchanged less frequently.d. (P x Y) / M and increases if dollars are exchanged more frequently.