Question

Explain the Fisher’s equation of exchange. ​

Answer 1

Explanation:

It is obtained by multiplying total amount of things (T) by average price level (P). Thus, Fisher's equation of exchange represents equality between the supply of money or the total value of money expenditures in all transactions and the demand for money or the total value of all items transacted.

Answer 2

Explanation:

The transactions version of the quantity theory of money was provided by the American economist Irving Fisher in his book- The Purchasing Power of Money (1911). According to Fisher, “Other things remaining unchanged, as the quantity of money in circulation increases, the price level also increases in direct proportion and the value of money decreases and vice versa”.