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Suppose That in the Equation of Exchange M = $1

Question 84

Multiple Choice

Suppose that in the equation of exchange M = $1 trillion, V = 8, P = 1.0 and Q = $8 trillion. If the money supply is increased by $1 trillion, velocity is constant and the economy is at full employment then:


A) output will decrease to $4 trillion.
B) output will increase to $12 trillion.
C) output will increase to $16 trillion.
D) the price level will increase to 2.0.

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