00:01
So here we have a proposition of the quantity of the theory of money, which is based off the equation of exchange, mv is equal to p .y, right? this is not the quantity theory.
00:11
This is just the equation of exchange, right? and it says, as hopefully you remember, that the total amount of money used is equal to the total amount of money used, right? this is sales, right? price times output.
00:26
That is the definition of how much stuff is being bought in the economy, right? how many things times how much they cost, this is what is spent.
00:34
It is the amount of money used times how many times it is spent, right? if the velocity of money is two, that means all the money was used twice.
00:43
So we have, the best gives us the total amount of spending.
00:47
So we know a whole bunch of things here.
00:49
The quantity theory predicts that changes in m only affect p.
00:59
And sometimes that's qualified with the idea of the long run.
01:04
But this is what the quantity theory of money says.
01:06
It's a prediction about how the equation of exchange behaves...