According to the quantity theory of money, the price level can be written as:
A) $P _ { t } ^ { * } = \bar { M } _ { t }$
B) $p _ { t } ^ { * } = \bar { M } _ { t } / \bar { Y } _ { t }$
C) $p _ { t } ^ { * } = \left( \bar { M } _ { t } \bar { V } _ { t } \right) / \bar { Y } _ { t }$
D) $P _ { t } ^ { * } = 1 / \bar { Y } _ { t }$
E) $p _ { t } ^ { * } = \bar { Y } _ { t } \bar { M } _ { t } / \bar { V } _ { t }$

Question

Quizplus · Accepted Answer

The quantity theory of money is expressed as $MV = PY$, where $M$ is the money supply, $V$ is the velocity of money, $P$ is the price level, and $Y$ is the output. Solving for $P$, we get $P = (MV)/Y$.

According to the Quantity Theory of Money, the Price Level Pt∗=MˉtP _ { t } ^ { * } = \bar { M } _ { t }Pt∗​=Mˉt​

According to the Quantity Theory of Money, the Price Level $P _ { t } ^ { * } = \bar { M } _ { t }$