If an economy produces 3,000 units of output when the price level is $2 and the velocity of money is 12, what is the money supply?
A) $1,000
B) $500
C) $2,000
D) $4,000

Question

Quizplus · Accepted Answer

The equation of exchange is MV = PQ, where M is the money supply, V is the velocity of money, P is the price level, and Q is the quantity of output. Plugging in the values: M * 12 = 2 * 3,000. Solving for M gives M = 500.

If an Economy Produces 3,000 Units of Output When the Price