This theory states that there is a direct relationship between the amount of money in an economy and the level of prices of goods and services sold (inflation). More money equals more inflation.
To calculate QTM:
M: Money Supply
V: Velocity of Circulation
P: Average Price Level
T: Volume of Transactions of Goods and Services
Total Spending= Amount of Money x Velocity of Circulation
If an economy had $3, and those $3 were spent 6 times in a month, the total spending for the month would be $18.
I believe this is an important topic to understand. QTM says that the quantity of money determines the value of money, and this is the basis of monetarism.
My name is Camden Alchanati and my goal is to teach you how to create a future of financial stability and growth!