Given the equation of exchange, MV = PQ, increasing the money supply when the economy is operating at less than full employment should primarily increase:
A) total output.
B) the price level.
C) unemployment.
D) all of the above.

Question

Quizplus · Accepted Answer

When the economy is operating at less than full employment, increasing the money supply (M) tends to increase total output (Q) because there are idle resources that can be utilized to increase production. This is because the increase in money supply can lead to increased spending, which in turn stimulates demand for goods and services, leading to an increase in production to meet this demand.

Given the Equation of Exchange, MV = PQ, Increasing the Money