The Difference Between the Equation of Exchange and the Quantity

question 143

Multiple Choice

The difference between the equation of exchange and the quantity theory of money is that the

• A)equation of exchange assumes that the level of real GDP is constant.
• B)quantity theory of money assumes that the Fed has no control over the money supply.
• C)equation of exchange assumes that the level of nominal GDP is constant.
• D)quantity theory of money assumes that velocity is virtually constant.

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Definitions:

Flexible Exchange Rates

A system where the value of a currency is allowed to fluctuate according to the foreign exchange market without direct interference by the country's government.

Exporting

The act of selling goods or services produced in one country to another country.

Importing

The act of bringing goods or services into one country from another for sale.

Account Surpluses

Situations where a country's exports exceed its imports over a given period, leading to a positive balance of trade.