The velocity of money.
Answer to Problem 1QQ
Option ‘c’ is the correct answer.
Explanation of Solution
Option (c):
The velocity of money can calculated using the following equation:.
Here,
V is the velocity of money.
P is the price
T is the number of transactions, and
M is the money supply.
Now, substitute the respective values into Equation (1).
Therefore, the velocity of money is 2. Thus, option (c) is correct.
Option (a):
The velocity of money supply can be calculated using the following equation:
Now, substitute the respective values into Equation (1).
Therefore, the velocity of money is 2. Thus, option (a) is incorrect.
Option (b):
The velocity of money supply can be calculated using the following equation:
Now, substitute the respective values into Equation (1).
Therefore, the velocity of money is 2. Thus, option (b) is incorrect.
Option (d):
The velocity of money supply can be calculated using the following equation:
Now, substitute the respective values into Equation (1).
Therefore, the velocity of money is 2. Thus, option (d) is incorrect.
Velocity of money supply: Velocity of money supply indicates that the number of times an unit of money changes hands in a given period of time.
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