CFA Practice Question

There are 341 practice questions for this study session.

CFA Practice Question

Assuming velocity is relatively constant and real income is relatively stable, an increase of 40 percent in the money supply will bring about an approximate change of ______ in the price level.

A. 4%
B. 40%
C. 0%
Correct Answer: B

Using the equation of exchange, MV = PQ, given these assumptions, there is a close relationship between changes in M and changes in P.

User Contributed Comments 3

User Comment
cong That's the conclusion of quantity theory fo money
khalifa92 this refers to as money neutrality theory.
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