Which of the following identities describe the equation of exchange?
A)Money in circulation × prices = velocity × income
B)Money in circulation × income = velocity × prices
C)Real GDP = money in circulation × velocity
D)Nominal GDP = money in circulation × velocity
E)Real GDP = prices × money in circulation × velocity

Question

Quizplus · Accepted Answer

The equation of exchange is represented by the formula MV = PQ, where M stands for the money supply, V is the velocity of money, P represents the price level, and Q is the quantity of goods and services produced (real GDP). When P and Q are multiplied together, they give the nominal GDP, making the correct representation of the equation of exchange "Nominal GDP = money in circulation × velocity."

Which of the Following Identities Describe the Equation of Exchange