Figure 30-3.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes.
-Refer to Figure 30-3.Suppose the relevant money-supply curve is the one labeled MS₁;also suppose the economy's real GDP is 30,000 for the year.If the money market is in equilibrium,then the velocity of money is approximately

Question

Figure 30-3.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes.

-Refer to Figure 30-3.Suppose the relevant money-supply curve is the one labeled MS₁;also suppose the economy's real GDP is 30,000 for the year.If the money market is in equilibrium,then the velocity of money is approximately

Quizplus · Accepted Answer

In equilibrium, the money supply (MS) equals money demand (MD). At GDP of 30,000, the intersection of MS₁ and MD occurs at approximately 180. The velocity of money is defined as GDP divided by the money supply, so V = 30,000/180 = 166.7. However, since velocity is usually expressed as the number of times the money supply changes hands in a year, we round 166.7 to the nearest whole number, which is 167. Therefore, the velocity of money is approximately 6 times per year, so the correct answer is B.