**Question:**From the equation of exchange, if both real income (Y) and the quantity of money (M) double and the price level (P) remains constant, then velocity (V) ______ and nominal income ______.**Choices:**- ○ doubles; remains constant- ○ decreases by 50 percent; quadruples- ● remains constant; doubles- ○ doubles; doubles- ○ none of the above**Explanation:**The correct answer is: **remains constant; doubles**This is because when real income (Y) and the quantity of money (M) both double while the price level (P) remains constant, the velocity of money (V) remains constant, resulting in nominal income doubling. The equation of exchange (MV = PY) reflects this relationship.

From the equation of exchange, if both real income (Y) and the quantity of money (M) double and the price level (P) remains constant, then velocity (V) and nominal income O doubles; remains constant decreases by 50 percent; quadruples O remains constant; doubles O doubles; doubles none of the above

From the equation of exchange, if both real income (Y) and the quantity of money (M) double and the price level (P) remains constant, then velocity (V) and nominal income O doubles; remains constant decreases by 50 percent; quadruples O remains constant; doubles O doubles; doubles none of the above

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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