Suppose that velocity rises while the money supply stays the same.It follows that
A)P x Y must rise.
B)P x Y must fall.
C)P x Y must be unchanged.
D)the effects on P x Y are uncertain.

Question

Quizplus · Accepted Answer

According to the quantity theory of money, MV = PY, where M is the money supply, V is velocity, P is the price level, and Y is real GDP. Therefore, if V increases while M stays the same, then PY must also increase to maintain the equality. This means that either P, Y, or both must rise.

Suppose That Velocity Rises While the Money Supply Stays the Same.It