[Boards: 3 / a / aco / adv / an / asp / b / biz / c / cgl / ck / cm / co / d / diy / e / fa / fit / g / gd / gif / h / hc / his / hm / hr / i / ic / int / jp / k / lgbt / lit / m / mlp / mu / n / news / o / out / p / po / pol / qa / qst / r / r9k / s / s4s / sci / soc / sp / t / tg / toy / trash / trv / tv / u / v / vg / vp / vr / w / wg / wsg / wsr / x / y ] [Search | Home]
Can someone explain MV=PQ to me?
Images are sometimes not shown due to bandwidth/network limitations. Refreshing the page usually helps.

Can someone explain MV=PQ to me?
>>
For a given period, the quantity of money in circulation times the rate at which money is being spent is equal to GDP times price level.
Or some shit like that.
>>
>>1033599
Bruh, me no understand.
>>
>>1034989
quantity of money in circulation x the rate at which money is being spent = GDP x price level.

Do you understand that when do pro-numerals are next to eachother, it is assumed they are being multiplied?
>>
>>1034995
How do you know how much money is in circulation?
How do you know how fast money is being spent?
Is GDP the Q in the equation?
I'm assuming P is price lol
>>
>>1034995
Yes I do have a math background, and economics, but I don't understand why and how to use this equation, how to get the information etc.
>>
>>1033583

The equation you described there is the quantity theory of money,

M= Amount of money in an economy
V= Velocity, or amount on transactions in the economy.

P= general price level
Q= Quantity/Output/GDP

its basically saying that changes to an economies money supply will have a direct effect too its general price levels.

Its been used heavily in recent years because of govs use of QE, especially in England.

Knowledge obtained from: BA Economics degree.
>>
Thanks >>1035022
I understand it better now
>>
>>1035003
>ECONOMICS BACKGROUND
They teach this in 101.
>>
File: chill dog.jpg (128 KB, 979x621) Image search: [iqdb] [SauceNao] [Google]
128 KB, 979x621
Holy shit this thread reminded me how laughable econ math is
Do you guys even know how to evaluate an integral? fukken lol
>>
It's a bullshit theory that states an increase in the supply of money creates a direct and proportional change in price levels.

If you increase the money supply by 10% everything will pretty much just become 10% more expensive... but this is empirically false. Remember a few years ago retards were saying QE was going to result in hyper inflation and America was going to become Zimbabwe... but this didn't happen and you didn't get a massive amount of inflation.

IRL the supply of money actually isn't generally the CAUSE of price inflation... but actual concrete supply or demand side factors. What actually generally causes inflation is credit demand results in price increases which ends up increasing the supply of money as a result of the increased demand.
>>
>>1035062
I have learned this before but I simply did not get it, now shut the fuck up and go bounce off to your perfect world where everyone gets eveything the very first second they hear it. I just wanted some fucking guidance, not very hard to understand is it?
>>
>>1035119
I get it, but honestly, the whole subject economics that is being taught in academia is bullshit, economics is a philosophy, not a math subject, it is to explain people why and how a phenomenon is present in the economy.
I think the best way to study economics is to study the real world phenomena. Instead of going to college learning theory on top of near useless theory.
>>
>>1035083

Most won't. They thought econ was a way to get out of math. Any respectable applied econ program is going to delve into calculus and statistics but don't tell the general public that.
>>
>>1033583
for simplicity, let's hold the velocity of money constant. The amount of money in the economy is a factor of the real price level times the quantity of money. If the real price level goes up, and the quantity remains the same, then there is more "money" in the economy as the currency is worth more per unit. Likewise, when the quantity of money goes up and the price level remains the same, there is actually more physical money in the economy but it is worth the same amount.
>>
>>1035308
The important part to this equation is understanding how the LM curve interacts with the IS curve to form the Aggregate demand curve. That is the real mind fuck imo.
>>
>>1035119
Well yes and no , lookup "income elasticity of demand" to see how increase in actual peoples income effects it

The QE money is sitting in banks though , the feds paying them not to let it out into general circulation so that part of your arguments invalid
>>
>>1035119
>If you increase the money supply by 10% everything will pretty much just become 10% more expensive
except that is not what it claims, it claims that price level will increase by 10% IF THE VELOCITY OF MONEY REMAINS CONSTANT, which it fucking doesnt during QE.

>What actually generally causes inflation is credit demand results in price increases which ends up increasing the supply of money as a result of the increased demand.

which this forumla states, as demand for money is also considered velocity of money
>>
>>1035267
It baffles me why you wold get so defensive over an empirical observation. Go back to being a dropout.
>>
>>1035344
Top kek faggot I learned economics in secondary school. Years ago.
>>
>>1035313
Does it not matter as well about what kind of product we are talking when talking about elasticity? For example luxury and primary goods have totally different elasticity stuff, no one will get more bread than usual when their income increases. However luxury expenses will increase with the income increase.
>>
>>1035308
>>1035311
Thanks, I read your replies and grasp the concept more than just 4 letters, I actually kinda get why it is those 4 letters and combinations within the equation.
What happens when there is inflation? Price stays same and gdp lowers? money stays same? Velocity goes down? Or does velocity stay same and money goes down?
>>
>>1035363
That may be true, but you obviously missed out on algebra in middle school.
>>
>>1035377
Actually, no, I don't hae problems with algebra at all, the problem I had was understanding the application of the equation.
>>
>>1035752
MV=PQ
M*V=P*Q

http://lmgtfy.com/?q=explain+mv%3Dpq&l=1

Come on, OP you lazy piece of shit. Step it up.
>>
>1035808
Fucking facepalm, I told you, I don't have any problems with any math aspect. The problem I had was how to use this the right way, how to collect the information for variables etc.
Tits
>>
>>1036599
Google how do I get info for mv=pq
>>
>>1035363
you sound like you're 15 and a complete moron. This is literally the most basic shit from high school econ and the math is the most basic of formulas from middle school algebra so you dont have a 'background in econ and math'

>>1035376
The fact you can't work this out for yourself with the information ITT furthers my point.
>>
>>1036732
Read my responses on the people that actually did give their insight on the difficulties I had understanding the deeper concept of this theory. I get it now because of them, different people learn differently. I like things to be explained to me sometimes.
>>
This Equation is correct if you prove it with the AS-AD curve.

A higher increase in the money supply generally lowers the inflation rate raises investement and employement and raises prices in the short run, if you look at the medium run where the Y will return to Yn by a leftward shift along the AD curve causing the price level move from P' to P" where P">P'>P and Y"=Yn but Yn < Y'

The MV=PQ is like the most simple equation you will find in Macro economics.