Given the equation of exchange, if V is stable, an increase in M will necessarily increase
A) the demand for money.
B) the price level.
C) nominal GDP.
D) real GDP.

Question

Quizplus · Accepted Answer

If V (velocity of money) is stable and M (money supply) increases, nominal GDP (which is the product of money supply and velocity) will increase according to the equation of exchange (MV = PQ).

Given the Equation of Exchange, If V Is Stable, an Increase