Using the quantity equation of money mv=pq, calculate the money supply (m) if velocity (v) equals 4, the price level (p) equals 100, and real gdp (q) equals 125.

Answers

The money supply using the quantity equation of money mv=pq, will be 3125.

We have,

The quantity equation of money,

i.e. mv = pq,

Here,

m = money supply,

v = velocity ,

p = price level,

q = real gdp

So,

Now,

According to the question,

To find money supply,

We will use The quantity equation of money,

i.e. mv = pq,

So,

Now,

Putting values,

i.e.

Money supply × velocity = price level × real gdp,

i.e.

m × 4 = 100 × 125

On solving we get,

m = 3125

i.e.

Money supply = 3125,

So,

The money supply using the quantity equation of money = 3125.

Hence we can say that the money supply using the quantity equation of money mv = pq, will be 3125.

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