If money growth and real output growth are both zero, the change in the price level will:

Question

Quizplus · Accepted Answer

According to the equation of exchange (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, if M (money growth) and Q (real output growth) are both zero, any change in the price level (P) must come from changes in V (velocity of money). Therefore, the change in the price level will equal the percentage change in velocity.

If Money Growth and Real Output Growth Are Both Zero