Answer to Question #90575 in Macroeconomics for Moore M. Lackay

Question

Find the stock of money in an economy where the velocity of money is 3, long run real output is 700,000 units and the long run price is $6.

Answer 1

The formula is: MV = PQ.

If the velocity of money is 3, long run real output is 700,000 units and the long run price is $6, then:

M = PQ/V = 6×700,000/3 = $1,400,000.