The equation of exchange which is MV = PY is an identity, which means it is true by definition. If you think carefully, what variable in the equation by the way it is defined really makes the equation of exchange an identity?
What will be an ideal response?
It is the velocity of money. It is defined as PY/M. Since it is defined this way, (nominal GDP divided by the money aggregate) any values of P, Y or M will make the equation true.
Economics
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In the short run, which of the following actions raises the interest rate?
A) a decrease in the demand for money B) an increase in bond prices C) an increase in the quantity of money D) an increase in the demand for money
Economics
Diminishing marginal returns do not exist for increases in
A) capital stock. B) labor. C) total factor productivity. D) Diminishing marginal returns exist for all of the above answers.
Economics