Regarding the equation of exchange,all of the following are true according to monetarists except
A)A reduction in M can leave real output unaffected.
B)The velocity of money is stable.
C)Changes in M may cause changes in P.
D)In reality,MV does not always equal PQ but it is still incredibly useful.

Question

Quizplus · Accepted Answer

Monetarists argue that the equation of exchange, MV = PQ, is a fundamental economic identity where M is the money supply, V is the velocity of money, P is the price level, and Q is the real output. They believe in the stability of the velocity of money (V) and that changes in the money supply (M) can lead to changes in the price level (P), potentially without affecting real output (Q). However, they do not claim that MV = PQ is not always equal in reality but still useful; instead, they treat this equation as a basic identity that is always true by definition, where any changes in one side of the equation must be reflected in changes on the other side.

Regarding the Equation of Exchange,all of the Following Are True