Equation of exchange

From Conservapedia - Reading time: 1 min

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An equation of exchange relates the quantity of money (M), its velocity of circulation (V), the quantity of goods and services (Q) and their average price (P):

M*V = P*Q

In other words, the total amount of money spent on goods and services (M*V) equals the total amount of money received for them (P*Q).

This equation relies on the classical quantity theory of money.