Quantity Theory Of Money
M represents the money supply.
V represents the velocity of money.
P represents the average price level.
T represents the volume of transactions in the economy.
This theory originated in the sixteenth century as European economists noticed higher levels of inflation associated with importing gold or silver from the Americas.
According to how the formula is derived, holding the transaction volume and velocity of money constant, any increases in the money supply will yield a proportional increase in the average price level.
Investment dictionary. Academic. 2012.
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