If Y and V are constant and M doubles, the quantity equation implies that the price level
A)more than doubles.
B)changes but less than doubles.
C)doubles.
D)does not change.

Question

Quizplus · Accepted Answer

The quantity equation in economics, often represented as MV = PY (where M is the money supply, V is the velocity of money, Y is the real output, and P is the price level), implies that if Y (real output) and V (velocity of money) are constant, and M (money supply) doubles, then P (price level) must also double to maintain the equality. This is because the equation shows a direct proportionality between the money supply and the price level when all other factors are held constant.

If Y and V Are Constant and M Doubles, the Quantity