Quantity Theory of Money - Explained
What is the Quantity Theory of Money?
Written by J. Mance Gordon
Updated at April 23rd, 2024
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What is the Quantity Theory of Money?
According to the quantity theory of money, the general price level of goods and services is proportional to the money supply in an economy.
What is the Equation for the Quantity Theory of Money?
American economist Irving Fisher proposed the following equation:
(M)(V) = (P)(T)
M, is money supply
V, is velocity of circulation,
P, is average price level
T, is volume of transactions of goods and services.
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