Periodic yield and Quantity theory of money: Difference between pages

Revision as of 14:20, 23 October 2012

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.

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-A rate of return - or cost of borrowing - expressed as the proportion by which the amount at the end of the period exceeds the amount at the start.
+''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.
-==Example 1==
+Monetarists believe that it is the amount of money in circulation which has the biggest effect on price levels and inflation rates.
-GBP 1 million is borrowed or invested.
-GBP 1.03 million is repayable at the end of the period.
+== See also ==
+* [[Fisher's equation]]
-The periodic yield (r) is:
-(End amount / start amount) - 1
-= (1.03 / 1) - 1
-= 0.03
-= 3%
-==Example 2==
-GBP  0.97 million is borrowed or invested.
-GBP 1.00 million is repayable at the end of the period.
-The periodic yield (r) is:
-(End amount / start amount) - 1
-= (1.00 / 0.97) - 1
-= 0.030928
-= 3.0928%
-==See also==
-*[[Effective annual rate]]
-*[[Discount rate]]
-*[[Nominal annual rate]]
-*[[Periodic discount rate]]
-*[[Yield]]