The quantity theory of money is expressed by the identity equation:
A)M*Y=P+Y
B)M*V=P*Y
C)M+V=P
D)none of the above

Question

Quizplus · Accepted Answer

The quantity theory of money is expressed by the equation M*V = P*Y, 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 states that the product of the money supply and its velocity is equal to the product of the price level and real output.

The Quantity Theory of Money Is Expressed by the Identity