Answer to Question #33364 in Microeconomics for Summer
million. A broader measure of the money supply, M2, is $50 million.
The country’s gross domestic product is $100 million. Production or
real output for the country is 500,000 units or products.
a. Determine the velocity of money based on the M1 money
b. Determine the velocity of money based on the M2 money
c. Determine the average price for the real output.
Other checkable deposits $12 million
P*Q = M*V, GDP = M*V
V = M1/GDP = 20/100 = 0.2
b. V = M2/GDP = 50/100 = 0.5
c. P = GDP/Q = 100 million/500,000 = $200
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