Question

What is the basic quantity equation of money?

Short answer

The formula for the basic quantity equation of money is$\text{MV ' =' PT.}$

Step-by-step solution

Definition

In economics, the quantity theory of money states that the price level and money supply in the economy are automatically balanced.

Explain the equation

The formula for the basic quantity equation of money is

$M$: The whole amount of the cash in the economy

$V$:The speed of circulation of money.

$P$:The regular cost level in the economy.

$T$: The volume of Exchange.