Which of the following is not implied by the quantity equation?
A)If velocity is stable and money is neutral,an increase in the money supply creates a proportional increase in nominal output.
B)If velocity is stable and money is neutral,an increase in the money supply creates a proportional increase in the price level.
C)With constant money supply and output,an increase in velocity creates an increase in the price level.
D)With constant money supply and velocity,an increase in output creates a proportional increase in the price level.

Question

Quizplus · Accepted Answer

The quantity equation (MV = PY) implies that with constant money supply (M) and velocity (V), an increase in output (Y) would lead to a decrease in the price level (P), not an increase.

Which of the Following Is Not Implied by the Quantity