economics medium Fill in the Blank

Irving Fisher's equation of exchange, which forms the basis of the Quantity Theory of Money, is expressed as MV = ___.

  1. PT
  2. Coase
  3. 1992
  4. 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).

Topic Macroeconomics - Money
Exam Relevance UPSC Prelims, SSC CGL
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