Asked by
Sarah Bachman
on Nov 11, 2024
Verified
Which of the following identities describe the equation of exchange?
A) Money in circulation × prices = velocity × income
B) Money in circulation × income = velocity × prices
C) Real GDP = money in circulation × velocity
D) Nominal GDP = money in circulation × velocity
E) Real GDP = prices × money in circulation × velocity
Equation of Exchange
An economic formula representing the relationship between the supply of money in an economy and the level of prices of goods and services, expressed as M*V = P*T.
Nominal GDP
The gross domestic product measured in current prices, without adjustment for inflation.
Real GDP
Gross Domestic Product adjusted for inflation, representing the total value of all goods and services produced over a specific time period in real terms.
- Acquire an understanding of how the equation of exchange correlates with real GDP, money supply, and the rate at which money changes hands.
Verified Answer
AB
Learning Objectives
- Acquire an understanding of how the equation of exchange correlates with real GDP, money supply, and the rate at which money changes hands.