The quantity equation for money, by itself:
A) may be thought of as a definition for velocity of money.
B) implies that the velocity of money is constant.
C) implies that the price level is proportional to the money supply.
D) implies that real gross domestic product (GDP) is proportional to the money supply.

Question

Quizplus · Accepted Answer

The quantity equation for money is MV = PY, where M is the money supply, V is the velocity of money, P is the price level, and Y is real GDP. By rearranging the equation, V = PY/M, it defines the velocity of money as the ratio of nominal GDP (PY) to the money supply (M).

The Quantity Equation for Money, by Itself