Which of the following reflects the basic concept of the equation of exchange?
A) MV = PY
B) Change in equilibrium real GDP = Change in autonomous spending × 1/(1 - MPC)
C) Potential change in M1 = Change in excess reserves × (1/r)
D) Unemployment rate = Number of unemployed / Number in labor force

Question

Quizplus · Accepted Answer

The equation of exchange is represented by MV = PY, where M is the money supply, V is the velocity of money, P is the price level, and Y is the real output. This equation is a fundamental concept in monetary economics, illustrating the relationship between the money supply and the nominal value of goods and services produced in an economy.

Which of the Following Reflects the Basic Concept of the Equation