For a given level of money and real GDP, an increase in velocity would lead to an increase in the price level.

Question

Quizplus · Accepted Answer

According to the Quantity Theory of Money, MV = PQ (where M is the money supply, V is the velocity of money, P is the price level, and Q is the real GDP). If V (velocity) increases while M (money supply) and Q (real GDP) remain constant, P (price level) must increase to maintain the equality.

For a Given Level of Money and Real GDP, an Increase