Assuming that V is constant,which of the following could result from an increase in M in the quantity equation?
A)a decrease in the price level
B)an increase in real GDP
C)a decrease in nominal GDP
D)an increase in the price level

Question

Quizplus · Accepted Answer

According to the quantity equation (MV = PQ), an increase in M (money supply) will result in an increase in P (price level) assuming that V (velocity of money) and Q (real output) remain constant. Therefore, the only correct choice is D, an increase in the price level.

Assuming That V Is Constant,which of the Following Could Result