According to the quantity theory of money, if an economy produces 5,000 units of output, its...
According to the quantity theory of money, if an economy produces 5,000 units of output, its money supply equals $40,000 and the velocity of money equals one, then the price level will equal:
| a. |
$8. |
|
| b. |
$0.13. |
|
| c. |
$200. |
|
| d. |
$1.25. |
Homework Answers
Answer
the equation of exchange is
MV=PY
M=money supply
V=velocity
P=price level
Y=real GDP
P=(MV)/Y=(40000*1)/5000
=$8
the price level is $8
Option a
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