From the Equation of Exchange, If Both Nominal Income and the Quantity

question 2

Multiple Choice

From the equation of exchange, if both nominal income and the quantity of money (M) double, the price level (P) decreases by 50 percent and velocity (V) remains constant, then real output (Y) ________.

• A) also doubles
• B) triples
• C) quadruples
• D) decreases by 50 percent
• E) none of the above

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Definitions:

Significant Degree

A high level or extent of importance or impact that an element or factor has in a particular context.

Inter-Entity Transactions

Transactions that occur between different entities within the same group, needing to be eliminated during consolidation to avoid double counting.

Foreign Exchange Gain

A profit resulting from changes in the exchange rate between the base currency used by a company and the foreign currencies in which it transacts.