The Income Velocity of Money Is Defined as Nominal GDP

question 31

Essay

The income velocity of money is defined as nominal GDP divided by the money supply.In the winter of 2010 the U.S.nominal GDP was estimated to be around $14.5 trillion annually and M2 was $8463.5 billion.Would the income velocity of M2 be equal to 1; <1; or > 1? Explain.

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Definitions:

Periodic Inventory System

An inventory system that updates the inventory balance at specific intervals, necessitating physical counts.

Cost of Merchandise

The total purchase cost of goods that a retailer, wholesaler, or distributor has bought for the purpose of reselling.

Freight In

The cost associated with transporting goods from the supplier to the buyer, typically recorded as part of the inventory cost.

Cost of Merchandise Sold

The direct costs attributable to the goods sold by a company, including the cost of the material and labor directly used in creating the goods.