If velocity of money is 6, the price level is 1.2, and real output is worth $1,100 billion, what is the money supply?
A)$65 billion
B)$153 billion
C)$220 billion
D)$5,500 billion

Question

Quizplus · Accepted Answer

Using the equation of exchange: 
MV = PQ 
where M is the money supply, V is velocity, P is the price level, and Q is real output.

Plugging in the given values: 
6M = 1.2(Q) 
6M = 1.2($1,100 billion) 
6M = $1,320 billion 
M = $220 billion

Therefore, the answer is choice C.

If Velocity of Money Is 6, the Price Level Is