What is money - Quantity theory of money

4 important questions on What is money - Quantity theory of money

What is the quantity theory of money?

Direct relation between the quantity of money in an economy and the level of prices of goods and services sold.

Why is money like any other commodity?

The increases in its supply decreases marginal value. --> an increase in money supply causes prices to rise (inflation) as they compensate for the decrease in money's marginal value.

Whats the Fisher Equation for money supply?

MV=PT

M: amount of money
V: Velocity of circulation
P: overall price level
T: Volume of goods and services transacted (Real GDP)
M directly influences the nominal income
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Why is the average if US currency held per person so high? (4.000$)

Because of criminals and foreigners

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