Quantity Theory of Money

Share this & earn $10
Marginal Revolution University
Published at : 03 Nov 2021
302800 views
4789
96

The quantity theory of money is an important tool for thinking about issues in macroeconomics.

The equation for the quantity theory of money is: M x V = P x Y

What do the variables represent?

M is fairly straightforward – it’s the money supply in an economy.

A typical dollar bill can go on a long journey during the course of a single year. It can be spent in exchange for goods and services numerous times. In the quantity theory of money, how many times an average dollar is exchanged is its velocity, or V.

The price level of goods and services in an economy is represented by P.

Finally, Y is all of the finished goods and services sold in an economy – aka real GDP. When you multiply P x Y, the result is nominal GDP.

Actually, when you multiply M x V (the money supply times the velocity of money), you also get nominal GDP. M x V is equal to P x Y by definition – it’s an identity equation.

You can think about the two sides of the equation like this: the left (M x V) covers the actions of consumers while the right (P x Y) covers the actions of producers. Since everything that is sold is bought by someone, these two sides will remain equal.

Up next, we’ll use the quantity theory of money to discuss the causes of inflation.

Subscribe for new videos: http://bit.ly/1Rib5V8

Macroeconomics Course: http://bit.ly/1R1PL5x

Next video: http://bit.ly/2k0ZCny

quantity theory of moneymacromacroeconomics

English Lesson # 140 – Versatile (Adjective) - Learn English Conversation, Vocabulary & Phrases

English Lesson # 140 – Versatile (Adjective) - Learn English Conversation, Vocabulary & Phrases

Florence and the Machine - Take Care (Radio 1 Live Lounge Special)

Florence and the Machine - Take Care (Radio 1 Live Lounge Special)

Dabin & Nurko - When This Is Over (Lyrics) feat. Donovan Woods

Dabin & Nurko - When This Is Over (Lyrics) feat. Donovan Woods

Measuring what makes life worthwhile - Chip Conley

Measuring what makes life worthwhile - Chip Conley

Our Wedding Ceremony *unedited!!*

Our Wedding Ceremony *unedited!!*

LOOSING $15,000 ON THE MOST "LOVELY" BUFFALO KING MEGAWAYS SLOT | Joe Stream Highlights #171

LOOSING $15,000 ON THE MOST "LOVELY" BUFFALO KING MEGAWAYS SLOT | Joe Stream Highlights #171

Bela Bartok - Out of Doors, Sz. 81 (Seong-Jin Cho) (1926)

Bela Bartok - Out of Doors, Sz. 81 (Seong-Jin Cho) (1926)

Oscar Welsh - Sixteen

Oscar Welsh - Sixteen

Feels Like Home: A Live Worship Experience

Feels Like Home: A Live Worship Experience

At Some Point

At Some Point

💣Galisteu comenta censura da Record e amadorismo vem à tona; Victor admite mentira; Pyong chora

💣Galisteu comenta censura da Record e amadorismo vem à tona; Victor admite mentira; Pyong chora

Private Skype Lessons & Google Hangouts & More for Patrons

Private Skype Lessons & Google Hangouts & More for Patrons

Becky Hill & Topic - My Heart Goes (La Di Da) | Official Lyric Video

Becky Hill & Topic - My Heart Goes (La Di Da) | Official Lyric Video

Adolf Loos' Ornament and Crime

Adolf Loos' Ornament and Crime

Andre de Grasse - The man that ALMOST beat Usain Bolt! 💨

Andre de Grasse - The man that ALMOST beat Usain Bolt! 💨

Varyajam1 Happiness latest is helping Good Kids TikTok Videos 2021 | A beautiful moment in life #2

Varyajam1 Happiness latest is helping Good Kids TikTok Videos 2021 | A beautiful moment in life #2

Excellent Song Of Lord Shiva - The Best Song of All Time !!! 🙏🙏🙏

Excellent Song Of Lord Shiva - The Best Song of All Time !!! 🙏🙏🙏

Friday Night Funkin' (The Intense Singing of Hatsune Miku, FNFBot)

Friday Night Funkin' (The Intense Singing of Hatsune Miku, FNFBot)

Diana and Helpful Funny Stories for Kids

Diana and Helpful Funny Stories for Kids

IF YOU PLAY GOLF YOU NEED TO WATCH THIS VIDEO

IF YOU PLAY GOLF YOU NEED TO WATCH THIS VIDEO

Emergency! stock up NOW! 🚨MAJOR CHANGES ARE COMING! 🚨

Emergency! stock up NOW! 🚨MAJOR CHANGES ARE COMING! 🚨

Carla's Dreams | Deliric - Dependent | Nocturn: Act 8

Carla's Dreams | Deliric - Dependent | Nocturn: Act 8

Fake news or lack of information:Answering the puzzle | Nikos Panagiotou | TEDxUniversityofMacedonia

Fake news or lack of information:Answering the puzzle | Nikos Panagiotou | TEDxUniversityofMacedonia

Eppic feat. Lindsey Stirling - By No Means (Official Video)

Eppic feat. Lindsey Stirling - By No Means (Official Video)

I Made A PUMPKIN BURGER From Scratch...well, sort of hehe x

I Made A PUMPKIN BURGER From Scratch...well, sort of hehe x

Arctic Monkeys - Fireside Lyric Video

Arctic Monkeys - Fireside Lyric Video

Olakira - In My Maserati [Official Video]

Olakira - In My Maserati [Official Video]

Nick Jonas - Close ft. Tove Lo (Lyrics)

Nick Jonas - Close ft. Tove Lo (Lyrics)

On Your Own

On Your Own

A Couple Escape From Insane Doctor | Film Explained in Hindi | Grotesque Slasher Explained in Hindi

A Couple Escape From Insane Doctor | Film Explained in Hindi | Grotesque Slasher Explained in Hindi

Oasis - The Importance Of Being Idle - Official Video

Oasis - The Importance Of Being Idle - Official Video

Machine Washable

Machine Washable

Counting Exercise for Rhythm and Suppleness

Counting Exercise for Rhythm and Suppleness

a cushty song

a cushty song

Bolier - Sweet Love (Calling Out Your Name) [Official Music Video]

Bolier - Sweet Love (Calling Out Your Name) [Official Music Video]

Gyakie - Forever (Official Music Video)

Gyakie - Forever (Official Music Video)

ΚΑΤΑΓΓΕΛΙΑ ΔΙΚΗΓΟΡΟΥ! Τεράστια κονόμα με τα Rapid test | Rantar

ΚΑΤΑΓΓΕΛΙΑ ΔΙΚΗΓΟΡΟΥ! Τεράστια κονόμα με τα Rapid test | Rantar

Right Combination - Scarface Soundtrack

Right Combination - Scarface Soundtrack

Sting - What Could Have Been | Arcane League of Legends | Riot Games Music

Sting - What Could Have Been | Arcane League of Legends | Riot Games Music

Native Land

Native Land

Vanessa Carlton - A Thousand Miles (Official Video)

Vanessa Carlton - A Thousand Miles (Official Video)

ABBA The Visitors With Lyrics

ABBA The Visitors With Lyrics

Rooftime - It's All About

Rooftime - It's All About

Take into account - Idiomatic verb

Take into account - Idiomatic verb

"NEED A QUICK SLIDE IN" S2EP5

"NEED A QUICK SLIDE IN" S2EP5

Best Of 2020 - Guinness World Records

Best Of 2020 - Guinness World Records

Taking Action is a Crucial Part of Manifestation by Teal Swan

Taking Action is a Crucial Part of Manifestation by Teal Swan

Kay Switch featuring Olamide & Wizkid - For Example (Remix)

Kay Switch featuring Olamide & Wizkid - For Example (Remix)

Mystro, WizKid - Immediately

Mystro, WizKid - Immediately