The equation of exchange
A) cannot be used in an economy with inflation.
B) is MV = PY.
C) becomes the quantity theory if velocity and the price level are constant.
D) All of the above answers are correct.

Question

Quizplus · Accepted Answer

The equation of exchange is MV = PY, which relates the money supply (M), velocity of money (V), total output of goods and services (Y), and the price level (P) in an economy. It can be used in an economy with inflation, but it may need to be adjusted to account for changes in velocity or other factors. If velocity and the price level are constant, it becomes the quantity theory of money.

The Equation of Exchange