In the quantity equation framework for understanding the determinants of long-run inflation,a rise in government spending ________ velocity,putting ________ pressure on inflation.

Question

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In the quantity equation framework (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, a rise in government spending typically increases the velocity of money as it stimulates economic activity, leading to more transactions. This increased velocity, without a corresponding increase in the money supply or output, puts upward pressure on the price level, hence inflation.

In the Quantity Equation Framework for Understanding the Determinants of Long-Run