If MV rises from 180 to 270,

Question

Quizplus · Accepted Answer

MV stands for “money velocity”, which is the frequency at which money is exchanged in the economy. The equation MV = PQ tells us that the total amount of money spent on goods and services (PQ) is equal to the money supply (M) multiplied by the money velocity (V).

When MV rises from 180 to 270, it means that money is changing hands more frequently, which should lead to an increase in the total amount of money spent on goods and services (PQ). Since the equation MV = PQ holds true, an increase in MV must result in an increase in PQ, and a decrease in MV would result in a decrease in PQ.

Therefore, the correct answer is C) PQ will rise by 50%. An increase in MV by 50% will lead to a 50% increase in PQ, assuming that M remains constant.

If MV Rises from 180 to 270