Re: JNU Doubts

Posted by Arushi :)) on May 12, 2014; 3:59am
URL: http://discussion-forum.276.s1.nabble.com/JNU-Doubts-tp7589336p7589348.html

For ques 55.
we have to use the equation MV=PY
For the transactions velocity of money , we have to include value of all the goods - intermediate, final goods
However for the Income velocity of money, only the value of final goods is included.
So that way we get two equations
i) M x transactions velocity of money = value of all goods
ii) M x income velocity of money = value of aggregate income
Vt-Vm = 5
=> Vt= 5+Vm
Let the value of aggregate income be X.
value of total transactions = 6X
M x (5+Vm) = 6X
M x Vm= X
Dividing the first equation by second:
(5+Vm)/Vm=6
=> 5Vm= 5
Therefore, Vm =1
M = 1000, n from equation (ii) we get value of aggregate income = 1x 1000 = 1000
Hence, part a