The quantity equation for money, by itself:
A)may be thought of as a definition for velocity.
B)implies that the velocity of money is constant.
C)implies that the price level is proportional to the money supply.
D)implies that real gross domestic product (GDP) is proportional to the money supply.

Question

Quizplus · Accepted Answer

The quantity equation, MV = PY, defines velocity (V) as the ratio of nominal GDP (PY) to the money supply (M), thus it can be thought of as a definition for velocity.

The Quantity Equation for Money, by Itself