Asked by Shaylie Pickrell on May 19, 2024
Verified
Suppose that M doubles and PQ remains the same.In that case we know that V
A) fell by 100%.
B) fell by 50%.
C) stayed the same.
D) rose by 50%.
E) rose by 100%.
PQ Remains Same
A situation in economic terms where the price level (P) and quantity (Q) of goods and services in the market stay unchanged over a period.
Velocity V
Velocity V typically refers to the velocity of money, a measurement of the rate at which money is exchanged in an economy.
Percentage Fall
A measure that indicates the decrease in a value or quantity, expressed as a percentage of its previous value.
- Familiarize oneself with the equation of exchange and its parts (MV=PQ).
- Detail the concepts behind the velocity of money and its repercussions for the economy.
Verified Answer
LM
Lelethu MgusheloMay 22, 2024
Final Answer :
B
Explanation :
According to the equation of exchange, MV=PQ. If M doubles and PQ stays the same, then V must be cut in half to keep the equation balanced. Therefore, V fell by 50%.
Learning Objectives
- Familiarize oneself with the equation of exchange and its parts (MV=PQ).
- Detail the concepts behind the velocity of money and its repercussions for the economy.