2. Quantity theory of money states
that money supply and price level in an
economy are in direct proportion to one
another. When there is a change in the
supply of money, there is a proportional
change in the price level and vice-versa.
Fisher Equation on Quantity Theory of Money
M*V= P*TMoney supply Velocity of money Price level volume of the
transactions
3. The entire stock of currency and other
liquid instruments in a country's economy
as of a particular time.
Money Supply
Velocity of Money
The rate at which money is exchanged
from one transaction to another, and how
much a unit of currency is used in a given
period of time.