Question

Suppose a small nation produces 2,000 bikes each year, each bike costs $75. The money supply for the nation is 3,000 one-dollar bills.

Answer 1

The right answer is 45 times.

What is the Velocity of Money ?

• The haste of plutocrats is a dimension of the rate at which plutocrats are changed in a frugality.
• It's the number of times that a plutocrat moves from one reality to another.
• It also refers to how much a unit of currency is used in a given period of time.

Number of times each dollar bill is used is the velocity of money denoted by V

Quantity theory of money states MV=PY

where M is money supply, P is price, Y is output and V as stated above velocity of money

We need to find V which is equal to PY/M

Here, M=S1*5000-$5000

P=$75, Y=3000

V =  (3000*75)5000

V = 2250005000

V  = 45

So, each dollar bill needs to be exchanged 45 times.

Learn more about Velocity of money here:

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