Question

If GDP is 1,500 and the money supply is 400, what is velocity?

Short answer

The velocity money is$3.75$.

Step-by-step solution

:Concept Introduction 

Money supply: monetary resource is that the total stock of cash within the economy at a degree of your time.

GDP (Gross Domestic Product): GDP of a rustic is that the market price of all finished (final) goods and services produced in an economy during a selected year. It represents the economic well-being of a rustic because it is that the aggregate income of that economy.

Velocity of cash: it's the pace of circulation of money within the economy.

Explanation of Solution 

The velocity of cash is pace of circulation of cash within the economy. The formula for calculating velocity of cash is given below.

$\text{velocityof money}=\frac{\text{Nominal GDP}}{\text{MoneySupply}}$$v=\frac{Y}{M^S}$

Given information

$\text{Money supply,}{\mathrm{M}}^{\mathrm{S}}=\$400$

$\text{Nominal GDP}=\$1500$

Calculation

$\text{With given money supply and nominal GDP, we calculate the velocity of money as follows:}$

$v=\frac{Y}{M^S}$

$\Rightarrow v=\frac{1500}{400}$

$\Rightarrow v=3.75$

Hence, the velocity money is $3.75$.