Difference between revisions of "Equation of exchange"
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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, ...) |
(Added category, fixed minor typo, inserted "*" symbol) |
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| − | An equation of exchange relates the quantity of | + | An '''equation of exchange''' relates the quantity of money (M), its velocity of circulation (V), the quantity of goods and services (Q) and their average price (P): |
| − | : | + | : M*V = P*Q |
| − | In other words, the total amount of money spent on goods and services ( | + | In other words, the total amount of money spent on goods and services (M*V) equals the total amount of money received for them (P*Q). |
This equation relies on the classical [[quantity theory of money]]. | This equation relies on the classical [[quantity theory of money]]. | ||
| + | |||
| + | [[Category:Economics]] | ||
Revision as of 13:14, May 5, 2007
An equation of exchange relates the quantity of money (M), its velocity of circulation (V), the quantity of goods and services (Q) and their average price (P):
- M*V = P*Q
In other words, the total amount of money spent on goods and services (M*V) equals the total amount of money received for them (P*Q).
This equation relies on the classical quantity theory of money.