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Why Is the Equation MV = PQ an Identity and Not

Question 94

Multiple Choice

Why is the equation MV = PQ an identity and not just an equation?


A) Because M x V equals real GDP and P x Q equals nominal GDP.
B) Because M x V equals nominal GDP and P x Q equals real GDP.
C) Because both M x V and P x Q equal real GDP.
D) Because both M x V and P x Q equal nominal GDP.
E) Because the monetarists assume it to be so.

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