In 2004, the Canadian economy was close to full employment. Real GDP was $1 comma 035 billion. The nominal interest rate was 3.0 percent a year, the inflation rate was 3.0 percent a yearcomma the price level was 1.30, and the velocity of circulation was 7.00. What was the quantity of money in Canada?

To find the quantity of money in Canada, we can use the quantity theory of money equation:M⋅V=P⋅YM⋅V=P⋅YWhere:MM = Quantity of MoneyVV = Velocity of circulationPP = Price levelYY = Real GDPGiven:Real GDP (YY) = $1,035 billionVelocity of circulation (VV) = 7.00Price level (PP) = 1.30 (inflation rate of 3% means prices increased by 3%, hence the price level becomes 1.30 times)Inflation rate = 3%We first need to adjust the nominal GDP (YY) for inflation to find the real GDP:Y=Nominal GDPPrice LevelY=Price LevelNominal GDPY=$1,035 billion1.30=$796.15 billionY=1.30$1,035 billion=$796.15 billion