Irving Fisher's equation of exchange, which forms the basis of the Quantity Theory of Money, is expressed as MV = ___.
- PT
- Coase
- 1992
- Paper Gold
Answer: PT
In Fisher's equation, M is the money supply, V is the velocity of money, P is the general price level, and T is the volume of transactions (or real output). It posits that assuming V and T are constant in the short run, any increase in the money supply (M) directly leads to a proportional increase in inflation (P).