The quantity of exchange: MV = PY is true by definition. Now suppose that the money supply (M) is initially at $100 while velocity (V) is constant at…

 The quantity of exchange: MV = PY is true by definition. Now suppose that the money supply (M) is initially at $100 while velocity (V) is constant at 5 and initial nominal GDP (PY) at $500. Finally, suppose that nominal GDP (PY) consistent with natural rate of output is $600 and the Fed’s required reserve ratio is 20%