The quantity equation shows that if velocity and output are constant, a given percentage in the money supply will lead to the proportionally different percentage increase in the price level.

Question

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The quantity equation (MV = PQ) suggests that if velocity (V) and output (Q) are constant, a given percentage increase in the money supply (M) will lead to a proportionally equal percentage increase in the price level (P), not a proportionally different increase.

The Quantity Equation Shows That If Velocity and Output Are