The quantity equation can be written as:
A) M/V = PY.
B) MV = P/Y.
C) MV = PY.
D) MP = VP.

Question

Quizplus · Accepted Answer

The quantity equation, also known as the equation of exchange, states that the money supply (M) multiplied by its velocity (V) equals the price level (P) multiplied by real output (Y). Mathematically, this can be written as MV = PY. So, choice C is the correct representation of the quantity equation. Choices A, B, and D are not accurate expressions of the equation of exchange.

The Quantity Equation Can Be Written As