Quantity theory of money: Difference between revisions
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''Economics''. | ''Economics''. | ||
A theory formalised by Irving Fisher, which links the level of prices with the amount of money in circulation. | A theory formalised by Irving Fisher, which links the level of prices with the amount of money in circulation. | ||
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Monetarists believe that it is the amount of money in circulation which has the biggest effect on price levels and inflation rates. | Monetarists believe that it is the amount of money in circulation which has the biggest effect on price levels and inflation rates. | ||
== See also == | == See also == | ||
* [[Fisher's equation]] | * [[Fisher's equation]] | ||
Revision as of 15:42, 20 August 2013
Economics.
A theory formalised by Irving Fisher, which links the level of prices with the amount of money in circulation.
It is defined as: P = MV/T, where P = price level, M = amount of money in circulation, V = velocity of circulation and T = volume of transactions.
Monetarists believe that it is the amount of money in circulation which has the biggest effect on price levels and inflation rates.
