In the Equation of Exchange MV = PT helps us understand how price inflation leads to...
In the Equation of Exchange MV = PT helps us understand how
price inflation leads to monetary inflation.
monetary inflation can lead to price inflation
price and monetary inflation are mutually caused.
first price inflation leads to monetary inflation, and then monetary inflation leads to more price inflation.
Homework Answers
Option B.
Equation of Exchange is expressed as M V = P T.
here M = money supply
V = velocity of circulation
P = price level
T = volume of trade
This relationship states the direct and proportionate relationship between money supply and price level.
According to this theory, an increase in money supply causes an inflation (increase in general price level).
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