According to the quantity equation, if velocity and output are constant, then an increase in the money supply leads to _____ in inflation.
A)a less than proportional increase
B)a less than proportional decrease
C)the same percentage increase
D)a greater than proportional increase

Question

Quizplus · Accepted Answer

The quantity equation (MV = PQ) suggests that if the money supply (M) increases while velocity (V) and output (Q) are constant, the price level (P) must increase by the same percentage as the money supply, leading to the same percentage increase in inflation.

According to the Quantity Equation, If Velocity and Output Are