- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 12. Monetary and Fiscal Policy
- Subject 1. What is Money?
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.
B. 40%
C. 0%
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 |
| YOUCANDOIT | Werd son |
| khalifa92 | this refers to as money neutrality theory. |