Holding the velocity of money constant, according to the equation of exchange, a 10 percent increase in the money supply could possibly cause which of the following?

A. A 5 percent decrease in the price level.
B. A 10 percent decrease in the quantity of output.
C. A 5 percent increase in the quantity of output.
D. A 10 percent increase in the price level.

ANSWER

D. A 10 percent increase in the price level.