According to the equation of exchange, if the quantity of money is $4 billion and the velocity of circulation is 3, nominal GDP is
A)$1.3 billion.
B)$8 billion.
C)$12 billion.
D)$0.75 billion.
E)$7 billion.

Question

Quizplus · Accepted Answer

The equation of exchange is MV = PQ, where M is the money supply, V is the velocity of money, P is the price level, and Q is the quantity of goods and services produced (real GDP). Here, M = $4 billion and V = 3, so nominal GDP (PQ) = 4 * 3 = $12 billion.

According to the Equation of Exchange, If the Quantity of Money