The quantity theory of money is built around the equation of exchange that says =,...
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The quantity theory of money is built around the equation of exchange that says =, where M is the money stock, V is the velocity of money in circulation, P is the price level, and Y is real GDP. The idea is that we can measure P and Y, and the product is nominal GDP; that we can measure M, and hence derive the velocity of money or the number of times in a year the average unit of money must change hands in order for this years stock of M to be sufficient to finance the purchase of thisyears nominal GDP.Here is some data on M (actually the Federal Reserve Systems measure called M1), P (actually the GDP deflator), and Y (actually real GDP).201820192020M (M1)$2,500 billion$3,000 billion$5,000 billionY (real GDP)$12,222billion$12,222billion$12,222billionP * Y (nominal GDP)$28,256billionP (price level)V (velocity of money)
5. What does the quantity equation predict will be the percent change in nominal GDP between 2018and 2019? a.14% b.20% c.17% d.25%
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