The following information is gathered for the XYZ economy:
Velocity of money = 3.5 times
average price level = $85
Real output = 15,000 units

(a) What is the nominal GDP for the XYZ economy?
(b) What is the size of the money supply for the XYZ?

Hi meanie222!!


(a) What is the nominal GDP for the XYZ economy?

The the nominal GDP is the sum value of goods and services produced in
an economy and valued at current prices.

In this case:
Nominal GDP = 15,000 units * $85 = $1,275,000


(b) What is the size of the money supply for the XYZ?

Nominal GDP = Money Supply * Velocity of money

Then:
Money Supply = Nominal GDP / Velocity of money = 
             = $1,275,000 / 3.5 =
             = $364,285.71


See for references the following section of the article "The Nature of
Money" by John Kutyn:
"How Money Creation and Destruction Affects the Economy"
http://www3.sympatico.ca/truegrowth/kutyn.htm#affects


I hope that this helps you. Feel free to request for a clarification
if you need it.

Regards.
livioflores-ga