Suppose the keynesian demand for money is given by LYry8100

Suppose the keynesian demand for money is given by L(Y,r)=y/8-100. If income(y) equals 12000 million and the interest rate(r) equals 0.05, calculate the value for the velocity of money.

Solution

v= PY/MS MS= money supply ,MD= money demand, Y= income ,P= price, V=velocity

And MD=MS

MD= Y/8-100

= 12000/8-100=130.43

MS= F(Y,r) and MD=MS

V=Y/F(Y,r)

=12000/0.05=2,40,000