Quantity theory of money: Difference between revisions
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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. | ||
It is defined as: | |||
P = MV / T | |||
Where: | |||
:P = price level, | |||
:M = amount of money in circulation, | |||
:V = velocity of circulation, | |||
: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 == | == See also == | ||
* [[Fisher's equation]] | * [[Fisher's equation]] | ||
Revision as of 15:06, 18 March 2015
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,
- 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.
