In the equation of exchange, MV and PQ can be interpreted as, respectively:
A) current GDP and constant GDP.
B) constant GDP and current GDP.
C) total spending and the dollar value of output in the economy.
D) the dollar value of output in the economy and total spending.

Question

Quizplus · Accepted Answer

The equation of exchange is represented as MV = PQ, where M is the money supply, V is the velocity of money, P is the price level, and Q is the quantity of goods and services produced in the economy. Therefore, MV represents total spending in the economy, and PQ represents the dollar value of output in the economy.

In the Equation of Exchange, MV and PQ Can Be