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Suppose that M is fixed but that P falls. According to the quantity equation which of the following could both by themselves explain the decrease in P? A. Y and V stay the same. B. Y fell. C. V rose. D.
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Suppose that M is fixed but that P falls. According to the quantity equation which of the following could both by themselves explain the decrease in P?

A. Y and V stay the same.
B. Y fell.
C. V rose.
D. V fell.

User Smbear
by
5.1k points

1 Answer

4 votes

Answer:

D. V fell.

Step-by-step explanation:

According to the quantity theory :

Money Supply x Velocity = Price x Output

If money supply is fixed, price is directly proportional to velocity.

If price fell, then velocity also fell.

V fell and Y rose

User Zmb
by
5.2k points
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