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Velocity is:

a. Y/(M x P) and increases if dollars are exchanged less frequently.
b. Y/(M x P) and increases if dollars are exchanged more frequently.
c. (P x Y)/M and increases if dollars are exchanged less frequently.
d. (P x Y)/M and increases if dollars are exchanged more frequently.

Respuesta :

Answer:

d

Explanation:

Solution:-

- The Quantity of theory of money states:

                      M * V = P * Y

Where,

           M = Money supply

           V = Velocity of money exchange

           P = The price level

           Y = Real GDP

- By re-arranging the formula and solving for "V" we have:

                     V = P*Y / M

- The expression on right hand side increases if exchange of dollars increases.

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