Which of the following is consistent with the equation of exchange?

Question

Quizplus · Accepted Answer

The equation of exchange is represented by the formula MV = PQ, where M is the money supply, V is the velocity of money, P is the price level, and Q is the real GDP. This formula shows that the product of the money supply and its velocity (how often money is used for transactions) is equal to the product of the price level and real GDP, which is essentially the nominal GDP. Therefore, all the statements A, B, and C are consistent with the equation of exchange. A) reflects the concept that the money spent in an economy must equal the total sales revenues, B) simplifies the equation to money supply and velocity equaling GDP (implicitly nominal GDP), and C) explicitly states the full equation of exchange.

Which of the Following Is Consistent with the Equation of Exchange