CFA Practice Question

There are 341 practice questions for this study session.

CFA Practice Question

The equation of exchange hypothesized by the quantity theory of money indicates that ______

I. MY = PV
II. velocity is equal to money supply divided by nominal GDP.
III. rate of inflation + growth rate of money supply = growth rate of real output + growth rate of velocity.
A. I only
B. II and III
C. None of these statements is correct.
Explanation: The equation of exchange is MV = PY, or: rate of inflation + growth rate of real output = growth rate of money supply + growth rate of velocity.

User Contributed Comments 3

User Comment
DashingDude Tricky
shiva5555 what does MV and PY stand for?
cleopatraliao MV=(Qty of money*velocity)
PY=(Price level*Real GDP)
Because GDP=PY and V=PY/M
Therefore, the equation of exchange is MV=PY :D
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