The quantity theory of money states that the money supply m


The quantity theory of money states that the money supply (M), velocity of money (V), price level (P), and real GDP (Y) are related by the equation . According to this equation, if velocity and real GDP are constant and the Federal Reserve decreases the money supply, then the price level _____.

A. decreases

B. increases

C. does not change

D. increases rapidly, then decreases slowly

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Business Economics: The quantity theory of money states that the money supply m
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