According to the equation of exchange if total output is 200

According to the equation of exchange, if total output is 2,000 units, the velocity of money is 5, and the money supply is $1,000, the average price per transaction will be a. $0.50 b. $2.50 c. $5.00 d. $7.50

Solution

b. $2.50

total money supply = money supply * velocity

1000*5 = 5000

Average price per transaction = total mney supply/ total output = 5000/2000 = 2.5