Which of the following expressions depicts the supply of money in Fisher's quantity theory of money?
In Fisher's transactions equation MV + M′V′ = PT, the left-hand side MV + M′V′ is the supply of money: currency multiplied by its velocity plus bank deposits multiplied by…
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Which of the following expressions depicts the supply of money in Fisher's quantity theory of money?
Answer and explanation
Correct answer C
In Fisher's transactions equation MV + M′V′ = PT, the left-hand side MV + M′V′ is the supply of money: currency multiplied by its velocity plus bank deposits multiplied by their velocity. MV and M′V′ are each only one part of this supply, while PT, the price level multiplied by the volume of transactions, is the demand for money.
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