The Equation of Exchange Indicates That

question 122

Multiple Choice

The equation of exchange indicates that:

• A) MQ equals VP
• B) The velocity of money and the supply of money vary proportionately with one another
• C) Other things being equal, an increase in V will increase P and/or Q
• D) Other things being equal, M and P are inversely related

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Definitions:

Financial Assets

Assets that derive value from a contractual claim, such as bank deposits, stocks, bonds, and derivatives.

Real Asset

Physical or tangible assets such as real estate, commodities, and natural resources that have intrinsic value.

Bonds

Fixed-income investments where an investor loans money to an entity (corporate or governmental) which borrows the funds for a defined period of time at a fixed interest rate.

Stocks

Shares of ownership in a company, representing a claim on the company's assets and profits.