Consider this equation for M2 GDP = PQ = MV?

Question

A. What is P?
i. List some of the things that make it change
B. What is V?
i. How does it change?

Answer 1

The symbols stand for:

 

P: Price Level

Q: Aggregate Quantity of Goods 

M: Money Supply

V: Velocity of Money (how many times a dollar gets spend on average)

 

The price level is affected by the money supply.

 

The volocity of money is really a by-product of the other 3 factors in the equation. If any of them change, so will V.