According to the equation of exchange, the
A)quantity of money multiplied by the velocity of circulation equals nominal GDP.
B)velocity of circulation is always smaller than the inflation rate.
C)quantity of money minus the velocity of circulation equals real GDP minus the price level.
D)quantity of money divided by the inflation rate equals real GDP.
E)quantity of money multiplied by the inflation rate equals nominal GDP.

Question

Quizplus · Accepted Answer

The equation of exchange is MV = PQ, where M is the quantity of money, V is the velocity of circulation, P is the price level, and Q is the real GDP. This equation states that the quantity of money multiplied by the velocity of circulation equals nominal GDP (PQ).

According to the Equation of Exchange, the