According to the quantity equation, if Y and M are constant and V doubles, what factor does the price level multiply by?
A) 1/4
B) 1/2
C) 1
D) 2

Question

Quizplus · Accepted Answer

According to the quantity equation, MV = PY. Given that Y and M are constant, if V doubles, PY must double as well to maintain the equation. Since Y is constant, P must double as well, which means that the price level multiplies by a factor of 2. Therefore, the correct answer is D.

According to the Quantity Equation, If Y and M Are