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Suppose the velocity of money (V) is 5 and Real Output (Y) is 50.

If the Money Supply (M) is 100, what will be the Price Level (P)?

Correct! If we know the money supply, the velocity of money, and the amount of real output, as we do in this case, and we know that M × V = P × Y, so 100 × 5 = P × 50. Solving for P yields P = 10.
Sorry, that’s incorrect. If we know the money supply, the velocity of money, and the amount of real output, as we do in this case, and we know that M × V = P × Y, so 100 × 5 = P × 50.
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      If the Money Supply (M) is 150, what will be the Price Level (P)?

      Correct! If we know the money supply, the velocity of money, and the amount of real output, as we do in this case, and we know that M × V = P × Y, so 150 × 5 = P × 50. Solving for P yields P = 15.
      Sorry, that’s incorrect. If we know the money supply, the velocity of money, and the amount of real output, as we do in this case, and we know that M × V = P × Y, so 150 × 5 = P × 50.
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          If the Money Supply (M) is 200, what will be the Price Level (P)?

          1:06
          Correct! If we know the money supply, the velocity of money, and the amount of real output, as we do in this case, and we know that M × V = P × Y, so 200 × 5 = P × 50. Solving for P yields P = 20.
          Sorry, that’s incorrect. If we know the money supply, the velocity of money, and the amount of real output, as we do in this case, and we know that M × V = P × Y, so 200 × 5 = P × 50.
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