According to the extreme monetarist position,using the equation of exchange,an increase in the quantity of money in circulation will
A)Increase real GDP.
B)Decrease the velocity of money.
C)Have no effect on the price level.
D)Increase the price level.

Question

Quizplus · Accepted Answer

According to the equation of exchange, MV=PQ, an increase in the quantity of money (M) without a corresponding increase in the velocity of money (V), real output (Q), or a decrease in the demand for money (P), will result in an increase in the price level (P). Therefore, the extreme monetarist position holds that an increase in the quantity of money in circulation will increase the price level but have no effect on real GDP or the velocity of money.

According to the Extreme Monetarist Position,using the Equation of Exchange,an