The growth version of the quantity equation
A) determines foreign exchange rates.
B) links the growth rates of money, velocity, prices and real output.
C) links money, velocity, prices, and real output.
D) determines the growth of the money supply.

Question

Quizplus · Accepted Answer

The growth version of the quantity equation, also known as the equation of exchange, links the growth rates of money, velocity, prices, and real output. It is expressed as MV = Py, where M is the money supply, V is the velocity of money, P is the price level, and y is real output. This equation suggests that changes in the growth rates of any of these variables can affect the others.

The Growth Version of the Quantity Equation