The quantity equation states that money times its velocity equals
A) the inflation rate times real output.
B) the price level times real output.
C) net exports times the exchange rate.
D) the interest rate times investment.
E) the interest rate times the inflation ratE.

Question

Quizplus · Accepted Answer

The quantity equation is MV = PY, where M is the money supply, V is the velocity of money, P is the price level, and Y is real output. Therefore, rearranging the equation we get that money times its velocity (MV) equals the price level times real output (PY). This implies that the total amount of spending in an economy (MV) is equal to the total value of goods and services produced in that economy (PY).

The Quantity Equation States That Money Times Its Velocity Equals