According to the equation of exchange, if the quantity of money is $20 billion, velocity 3, and real GDP is $6 billion, then the price level is
A) 10.
B) 40.
C) 1.6.
D) 1.1.
E) 2.

Question

Quizplus · Accepted Answer

The equation of exchange is MV = PQ, where M is the quantity of money, V is velocity, P is the price level, and Q is real GDP. Substituting the given values into the equation, we get 20 billion * 3 = 6 billion * P. Solving for P, we get P = 10.

According to the Equation of Exchange, If the Quantity of Money