|Mause I 221
Quantity theory/quantity equation/traffic equation/Fisher: (also exchange equation or transaction equation):
M x V T = T real x P T = T nom
M: Money supply - V: Speed of circulation - P: Price level - T: Transactions
This relation links the monetary side of a market economy with its real sphere. Each transaction on the goods and factor markets (right side of the equation) is linked to a cash flow. T actually characterizes the real transaction volume (volume component) and PT the associated price level, so that the product of both variables yields the nominal transaction volume T nom. The nominal money supply M required for the payment flows is smaller than T nom, since the money supply within a certain period of time can be used more than once for transaction purposes.
Circulation speed: records this multiple use.
Total demand: The product of money supply M and velocity VT is also referred to as total monetary demand.
Gross Domestic Product: is used when there is no data on transactions between companies or consumption by private households.
Causality: the relations based on Fisher's equation make no statements about causal connections._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. The note [Author1]Vs[Author2] or [Author]Vs[term] is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition.
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