Assume that the market for money clears, that is the quantity of money supplied equals the quantity of money demanded.

Based on the following identity, M x V = P x Y, please answer the following question:

M = Stock of money.

V= the velocity of the money supply

P = the aggregate price Index or price level

Y = the real output of the economy

Q.1 A periodic increase in the money supply when real output and money velocity are not changing would be inflationary.

True False

Q.2 An increase in the money supply when real output is increasing and velocity is constant is not necessarily inflationary.

True False

Q.3A decline in the rate of the growth of the money supply would be deflationary if velocity and real output are constant.

True False