Question

According to the basic quantity equation of money, if price and output fall while velocity increases, then: Group of answer choices

Answer 1

Answer:

The quantity of money will fall as well.

Explanation:

According to the quantity theory of money, money supply (M) and price level (P) in an economy are in direct proportion to one another.

In other words, the percentage change in price level is proportionate to the percentage change in Money Supplied.

The formula is given as:

M*V= P*T

where,  V = Velocity of money  and T = volume of the transactions.

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