According to the equation of exchangeA) when M rises,P must rise.B) when M rises,V must fall.C) when MV falls,PQ must fall.D) when V rises,Q must rise.

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Darlene Parker · Accepted Answer

Final Answer : C, Explanation :  The equation of exchange is MV = PQ, where M is the money supply, V is the velocity of money, P is the price level, and Q is the quantity of goods and services produced. If the product of M and V (the left side of the equation) falls, then the product of P and Q (the right side of the equation) must also fall to maintain the equality, assuming all variables are positive.

According to the equation of exchange

A) when M rises,P must rise.
B) when M rises,V must fall.
C) when MV falls,PQ must fall.
D) when V rises,Q must rise.

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