According to the quantity equation, if Y doubles, V is constant, and M doubles, what factor does the price level multiply by?
A) 1/4
B) 1/2
C) 1
D) 2

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 the real output. If Y doubles and M doubles while V remains constant, the equation balances without changing P, meaning the price level does not multiply (factor of 1).

According to the Quantity Equation, If Y Doubles, V Is