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New page: An equation of exchange relates the quantity of omney (M), its velocity of circulation (V), the quantity of goods and services (Q) and their average price (P): : MV = PQ In other words, ...
An equation of exchange relates the quantity of omney (M), its velocity of circulation (V), the quantity of goods and services (Q) and their average price (P):
: MV = PQ
In other words, the total amount of money spent on goods and services (MV) equals the total amount of money received for them (PQ).
This equation relies on the classical [[quantity theory of money]].
: MV = PQ
In other words, the total amount of money spent on goods and services (MV) equals the total amount of money received for them (PQ).
This equation relies on the classical [[quantity theory of money]].