The equation of exchange states that
A)money in circulation × prices = velocity × income
B)money in circulation × income = velocity × prices
C)real GDP = money in circulation × velocity
D)nominal GDP = money in circulation × velocity
E)real GDP = prices × money in circulation × velocity

Question

Quizplus · Accepted Answer

The equation of exchange is given by MV = PQ, where M is the money supply, V is the velocity of money, P is the price level, and Q is the real GDP. Nominal GDP is represented by PQ, so the equation can be rewritten as nominal GDP = money in circulation (M) × velocity (V).

The Equation of Exchange States That