Which one of the following is NOT the formula for the quantity theory of money?

• A. P = M V / Y
• B. M = P Y / V
• C. M + V = P + Y
• D. M V = P Y

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the Quantity Theory of Money, which is commonly expressed by the equation \(M \times V = P \times Y\), where \(M\) is the money supply, \(V\) is the velocity of money, \(P\) is the price level, and \(Y\) is the real output (real GDP).
2. Step 2: Recognize that the equation \(M \times V = P \times Y\) can be algebraically rearranged to express any variable in terms of the others, such as \(P = \frac{M \times V}{Y}\) or \(M = \frac{P \times Y}{V}\), which are valid forms derived from the original equation.
3. Step 3: Identify that the expression \(M + V = P + Y\) is not a valid formula for the quantity theory of money because it incorrectly uses addition instead of multiplication, which does not reflect the economic relationship between these variables.
4. Step 4: Confirm that the valid formulas are those that maintain the multiplicative relationship between money supply and velocity on one side, and price level and output on the other side.
5. Step 5: Conclude that the formula \(M + V = P + Y\) is the one that does NOT represent the quantity theory of money.