What is the equation of exchange?
A) money in circulation × prices = velocity × income
B) money in circulation × income = velocity × prices
C) real GDP = money in circulation × velocity
D) nominal GDP = money in circulation × velocity

Question

What is the equation of exchange?  
A) money in circulation × prices = velocity × income 
B) money in circulation × income = velocity × prices 
C) real GDP = money in circulation × velocity 
D) nominal GDP = money in circulation × velocity

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 real output. Nominal GDP is equivalent to the product of money supply and velocity, hence option D is correct.

What Is the Equation of Exchange