The Equation of Exchange

question 396

Multiple Choice

The equation of exchange

• A) cannot be used in an economy with inflation.
• B) is MV = PY.
• C) becomes the quantity theory if velocity and the price level are constant.
• D) All of the above answers are correct.

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Definitions:

Value

The degree of importance, worth, or usefulness of something.

Plowback Ratio

The proportion of earnings retained by a company after dividends have been paid, for reinvestment in its core business.

Retention Ratio

A financial metric indicating the percentage of a company's earnings that is retained and not paid out as dividends; it is also known as the plowback ratio.

Dividends Paid

The total amount of money distributed by a corporation to its shareholders from its earnings.