Asked by Alexia Salcedo on May 25, 2024
Verified
If MV rises from 250 to 375,
A) PQ will fall by 50%.
B) PQ will remain the same.
C) PQ will rise by 50%.
D) PQ will rise by 100%.
MV Rises
A notation that can imply an increase in the velocity of money, which is the frequency at which one unit of currency is used to purchase domestically-produced goods and services within a given time period.
PQ Falls
This term is not sufficiently defined to provide a clear and specific definition without additional context; it could potentially relate to a concept within economics, involving a decrease in quantity (Q) and price (P).
PQ Rises
Indicates an increase in the product of price (P) and quantity (Q), suggesting growth in total revenue or output.
- Absorb the significance of the exchange equation and its constituents (MV=PQ).
- Study the association between the volume of money, inflation levels, and economic constancy.
Verified Answer
RM
Rushabh MeherMay 29, 2024
Final Answer :
C
Explanation :
The equation of exchange is MV = PQ, meaning the total spending in an economy is equal to the money supply (M) multiplied by the velocity of money (V), which is equal to the price level (P) multiplied by real output (Q). If MV goes up, then PQ must also go up. Since MV increases by 50% (from 250 to 375), PQ must also increase by 50%. Therefore, the correct answer is C.
Learning Objectives
- Absorb the significance of the exchange equation and its constituents (MV=PQ).
- Study the association between the volume of money, inflation levels, and economic constancy.