In Fisher's equation of exchange MV = PT, if the velocity of money (V) and the volume of transactions…
With V and T constant, MV = PT gives P = (V/T)M. The price level is therefore directly proportional to the quantity of money.
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In Fisher's equation of exchange MV = PT, if the velocity of money (V) and the volume of transactions (T) remain constant, what relationship follows between the price level (P) and the quantity of money (M)?
Answer and explanation
Correct answer C
With V and T constant, MV = PT gives P = (V/T)M. The price level is therefore directly proportional to the quantity of money.
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RPSC School Lecturer (Sanskrit Education)