Respuesta :
According to the equation of exchange, if nominal GDP is $5,000 billion and the money supply is $1,000 billion, the velocity of money is 5.
Nominal GDP is an assessment of monetary manufacturing in an economy that consists of current charges in its calculation. In different words, it would not strip out inflation or the pace of growing prices, which can inflate the increase in growth figure.
The velocity of money is the frequency at which one unit of forex is used to purchase regionally- produced goods and offerings inside a given term. In different phrases, it's far the variety of times one dollar is spent to buy goods and services per unit of time.
Calculate the velocity of money using the formula:
The velocity of money = Nominal GDP / Money supply
The velocity of money = 5000 / 1000 = 5
The equation of exchange is a mathematical expression of the quantity theory of cash. In its basic form, the equation says that the overall sum of money that adjusts palms in a financial system equals the full money fee of products that alternate fingers, or that nominal spending equals nominal profits.
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