All other things unchanged, the velocity of money will _______ if the quantity of money demanded _______.

Question

Quizplus · Accepted Answer

According to the equation of exchange, MV=PQ, where M is the quantity of money, V is the velocity of money, P is the price level and Q is the quantity of goods and services produced. Keeping all other variables constant, if the quantity of money demanded decreases, then there will be less money in circulation and people will have to spend their existing money more frequently to finance their transactions, leading to an increase in the velocity of money. Therefore, the correct answer is A.

All Other Things Unchanged, the Velocity of Money Will _______