According to the quantity theory of money,when the money supply doubles,which of the following variables doubles?
A)the price level
B)the velocity of money
C)the real GDP
D)the real interest rate

Question

Quizplus · Accepted Answer

According to the quantity theory of money, the equation of exchange is MV = PT, where M is the money supply, V is the velocity of money, P is the price level, and T is the real GDP. In this equation, if the money supply doubles and the other variables remain constant, the price level (P) will also double. Therefore, the correct answer is A.

According to the Quantity Theory of Money,when the Money Supply