The Quantity Theory of Money
Economists regularly use the term money supply without defining it.
A notable example is the equation of exchange in the quantity
theory of money.
MV = PT
This relates the money supply, M, and the velocity of money, V, to
the average price level, P, and the total number of transactions,
T, in a given time period. The equation is simply an identity,
meaning it is true by definition. Yet it is often used to "prove"
that the average price level increases with the quantity of money.
An identity says nothing about causal relations. The only thing we
know is the product MV, which equals the national income, PT, which
itself is only roughly measurable. The quantity of money, M, remains undefined and
unknowable.
the equation above proves that the variable M can be manipulated
throught the use of V,P,T
sorry, be simple abit can or not,
we only know that SP = TT + 4D,
My uncle Andrew theory is Dr Chee = PAP + Despot
