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Definition – What is the quantity theory of money?
The quantity theory of money balances the price level of goods and services with the amount of money in circulation in an economy.
Formula – How to calculate the quantity theory of money
The quantity theory of money formula is:
MV = PT
Where:
M = Total amount of money in circulation in the economy
V = Velocity of money
P = Average price level
T = Volume of transactions
The individual equations can be solved as:
M = PT / V
V = PT / M
P = MV / T
T = MV / P
Sources and more resources
- Wikipedia – Quantity Theory of Money – An overview of the quantity theory of money.
- Khan Academy – Quantity theory of money – Part of a larger course on macroeconomics, this video describes the quantity theory of money and how parts of it are calculated.
- ACDC Leadership (YouTube) – Quantity Theory of Money – Macro 2.5 – A video explaining the quantity theory of money.
- jodiecongirl (YouTube) – The Quantity Theory of Money – Another video explaining the quantity theory of money.