De kwantiteitstheorie van geld I

In a small town, Jordan pays one dollar to buy a slice of pizza from Sam, who runs a food truck.

Later, Sam uses that same dollar to pay for his son’s ride on the carousel at the local carnival.

Then, the ride operator, Tom, uses that dollar to buy a comic book from a nearby bookstore.

This dollar moves from one person to another and is used three times—for pizza, a ride, and a comic book.

This example shows how the Quantity Theory of Money connects money, spending, and prices.

The theory involves four key variables: M is the money supply, V is the velocity of money—how often each dollar is spent, P is the average price level, and T is the total number of transactions. The relationship is shown by the equation MV = PT.

In our example, M is one dollar, V is three, since the dollar is used three times, the average price level, P, is one dollar, and T is the number of transactions involving goods and services bought: pizza, a ride, and a comic book.

The theory assumes V and T stay stable in the short term, so changes in M directly affect the price level, P.