Equation of exchange
This is the current revision of Equation of exchange as edited by JLindon (talk | contribs) at 19:18, May 5, 2007. This URL is a permanent link to this version of this page.
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.