View source for Quantity theory of money

''Economics''. 
 
A theory formalised by Irving Fisher, which links the level of prices with the amount of money in circulation. 

It is defined as: 

P = MV / T 

Where: 

:P = price level, 

:M = amount of money in circulation, 

:V = velocity of circulation,

:T = volume of transactions. 

Monetarists believe that it is the amount of money in circulation which has the biggest effect on price levels and inflation rates.


== See also ==
* [[Fisher's equation]]