According to the quantity equation, if the velocity of money and the supply of money are fixed, and the price level increases, then the quantity of goods and services purchased:
A) increases.
B) decreases.
C) does not change.
D) may either increase or decrease.

Question

Quizplus · Accepted Answer

The quantity equation is MV = PQ, where M is the money supply, V is the velocity of money, P is the price level, and Q is the quantity of goods and services purchased. If V and M are fixed and P increases, then Q must decrease to maintain the equality, as the increase in P would require a decrease in Q to keep the product PQ constant.

According to the Quantity Equation, If the Velocity of Money