The equation of exchange
A) is MV = PY.
B) becomes the quantity theory if velocity and the price level are constant.
C) cannot be used in an economy with inflation.
D) All of the above answers are correct.
A
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A change in the level of the supply of money
A) increases the long-run values of the interest rate and real output. B) decreases the long-run values of the interest rate and real output. C) has no effect on the long-run values of the interest rate, but may affect real output. D) has no effect on the long-run values of real output, but may affect the interest rate. E) has no effect on the long-run values of the interest rate and real output.
For a normal good, the substitution and income effects of a price decrease work in the same direction to increase the quantity demanded of that good
a. True b. False