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If nominal GDP is 28000 and the money supply is 7000, what is velocity? 11.5 .68 4 18
Solution
- 4 is correct
According to quantity theory of money, M*V = P*Y
P*Y= 28000
M= 7000
V= 28000/7000= 4
- money supply in the economy increases.
Central bank buys bonds from the bank in exchange for money, This increases money supply.
- 830 million is correct
Assets include cash in vault, reserves, loans and bonds.
Since sale of loan is balanced by cash received in exchange
Total assets= 50+180+600= 830 million

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If nominal GDP is 28000 and the money supply is 7000, what is velocit.pdf

  • 1. If nominal GDP is 28000 and the money supply is 7000, what is velocity? 11.5 .68 4 18 Solution - 4 is correct According to quantity theory of money, M*V = P*Y P*Y= 28000 M= 7000 V= 28000/7000= 4 - money supply in the economy increases. Central bank buys bonds from the bank in exchange for money, This increases money supply. - 830 million is correct Assets include cash in vault, reserves, loans and bonds. Since sale of loan is balanced by cash received in exchange Total assets= 50+180+600= 830 million