Multiple Choice
Suppose that in the equation of exchange M = $1 trillion, V = 6, P = 1.0 and Q = $6 trillion. If the money supply is increased by $1 trillion and V is constant, then:
A) both P and Q could increase.
B) the price level could increase to 2.0 if the economy is at full employment.
C) output could increase to $12 trillion assuming that the economy is not at full employment and can produce this level of output.
D) all of the above.
Correct Answer:
Verified
Correct Answer:
Verified
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