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Reverted edits by JLindon (Talk); changed back to last version by Aschlafly
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):
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):
: M*V = P*Q
: MV = PQ
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).
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]].
This equation relies on the classical [[quantity theory of money]].