Given the equation of exchange, MV = PQ, increasing the money supply when the economy is at full employment should primarily increase:
A) employment.
B) the price level.
C) the economy's total output.
D) all of the above.

Question

Quizplus · Accepted Answer

When the economy is at full employment, increasing the money supply (M) primarily leads to an increase in the price level (P), as output (Q) cannot significantly increase due to the economy already operating at its full capacity.

Given the Equation of Exchange, MV = PQ, Increasing the Money