Question

What is the basic quantity equation of money?

Short answer

The formula for basic quantity equation of money is

$\mathrm{MV}=\mathrm{PQ}$

Step-by-step solution

Step 1:Definition

The quantity theory of money in economics suggests that the cost level and money supply in the economy are directly proportional to one another

Explain the Equation

The formula is

$\mathrm{MV}=\mathrm{PQ}$

$\mathbf{M}$- money supply

$\mathbf{V}$- the velocity of money

$\mathbf{P}$-price level

$\mathbf{Q}$- the real output of the economy