Equation of exchange


Monetarists assert that the empirical study of monetary history shows that inflation has always been a monetary phenomenon. The quantity theory of money, simply stated, says that any change in the amount of money in a system will change the price level. The general price level is related to the level of real economic activity , the quantity of money and the velocity of money.

Related formulas


MTotal nominal amount of money in circulation (dimensionless)
VVelocity of money (the average frequency with which a unit of money is spent) (dimensionless)
PPrice level (dimensionless)
QIndex of the real value of final expenditures (dimensionless)