CA Foundation P4 · Chapter 8 · Question 5 of 15
Using Fisher's equation MV = PT, if money supply M = Rs. 500 crore, velocity V = 6 and volume of transactions T = 1,500 crore units, the price level P is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) 2
Explanation
P = MV / T = (500 x 6) / 1,500 = 3,000 / 1,500 = 2. Reversing the ratio gives 0.5.
More Money Market MCQs
- Q7In the RBI's monetary aggregates, broad money (M3) is equal to:
- Q8The currency-deposit ratio is 0.2 and the reserve-deposit ratio is 0.1. If high-powered money is Rs. 500 crore, the money supply is:
- Q9Reserve money (high-powered money) consists of:
- Q10When the central bank purchases government securities in the open market, it:
- Q11An increase in the cash reserve ratio (CRR) will, other things being equal: