Quantity theory of money: Difference between revisions
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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.
See also