Which of the following is true about the equation of exchange?
A)The equation of exchange can be presented as: M V = P Q.
B)Velocity represents the average number of times that a dollar is used in purchasing final goods or services in a one-year period.
C)If M increases, and V remains constant, then P must rise and/or Q must rise.
D)All of the above are true about the equation of exchange.

Question

Which of the following is true about the equation of exchange?​
A)​The equation of exchange can be presented as: M V = P Q. 
B)​Velocity represents the average number of times that a dollar is used in purchasing final goods or services in a one-year period. 
C)​If M increases, and V remains constant, then P must rise and/or Q must rise. 
D)​All of the above are true about the equation of exchange.

Quizplus · Accepted Answer

A) This is the formal presentation of the equation of exchange, but it does not represent a true statement about it.
B) This is a true statement about the equation of exchange. Velocity measures the frequency with which money changes hands, and is expressed as the ratio of nominal GDP to the money supply.
C) This is also a true statement about the equation of exchange. An increase in the money supply, other things equal, will lead to an increase in either prices or output, or both. 
D) Therefore, D is the correct answer, as all the statements presented are correct.

Which of the Following Is True About the Equation of Exchange?​

Which of the Following Is True About the Equation of Exchange?