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Andreas93 [3]
3 years ago
14

Using the equation of exchange, if the Federal Reserve Bank expands the money supply and but there is no real growth in the econ

omy and the general price level does not rise, what conclusion must we draw
Business
1 answer:
fenix001 [56]3 years ago
8 0

Answer:

The conclusion we can draw is that businesses invest heavily on capital expenditures for future growth.

Explanation:

The equation of exchange is:  M × V = P × Q, where:

M: the money supply

V: the velocity of money

P: the general price level

Q: the expenditures

Because V increase while P (no real growth in the economy mean the velocity of money is stable) and P are unchanged, Q must increase too. The increase is usually on capital expenditures.

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