Economics
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Quantity Theory of Money

Links the money supply and its velocity to the price level and real output.

Formula

M×V=P×QM \times V = P \times Q

Variables

MMoney supply
VVelocity of money
PPrice level
QReal output

Example

M $2T, V 4 → nominal GDP (P×Q) = $8T

Did You Know?

Milton Friedman built monetarism on this identity, arguing “inflation is always a monetary phenomenon.”

moneyvelocitymonetarism