Question

Given the quantity theory of money's equation of exchange MV = PY demonstrate that P and Y are inversely related.

Answer 1

P.and Y are inversely related where P is the price level and Y is the real output and this is because of the fact that consider nominal output remains same. If the price level increases then at the same nominal output, the value of currency decreases and therefore the real output decreases and considering the price level decreases at the same nominal of the value of real output increases because the value of currency increases and this is why they are inversely proportional to each other