29. If nominal GDP in a year is $15 trillion and the quantity of money is $3 trillion what is the velocity of money?
Answer: A
The velocity of money is 5.
The velocity of money can be calculated using the formula \( V = \frac{GDP}{M} \), where \( V \) is the velocity, \( GDP \) is the nominal GDP, and \( M \) is the quantity of money. Substituting the values, we have \( V = \frac{15 \text{ trillion}}{3 \text{ trillion}} = 5 \).
A) 5
Option A is correct because it accurately represents the velocity of money calculated from the given nominal GDP and quantity of money. Using the formula, the calculation yields a velocity of 5, indicating that each dollar is spent five times within the year in the economy.
B) 12
Option B is incorrect. If the velocity were 12, the calculation would imply a nominal GDP of \( 3 \text{ trillion} \times 12 = 36 \text{ trillion} \), which does not match the provided nominal GDP of $15 trillion.
C) 18
Option C is also incorrect. A velocity of 18 would suggest a nominal GDP of \( 3 \text{ trillion} \times 18 = 54 \text{ trillion} \), which is significantly higher than the actual nominal GDP of $15 trillion.
D) 45
Option D is incorrect as well. If the velocity were 45, that would imply a nominal GDP of \( 3 \text{ trillion} \times 45 = 135 \text{ trillion} \), far exceeding the stated nominal GDP of $15 trillion.
Conclusion
The correct answer, 5, accurately reflects the relationship between nominal GDP and the quantity of money using the velocity of money formula. All other options fail to align with the data provided, demonstrating a misunderstanding of how the velocity is calculated based on the given economic indicators.