00:01
So here we are talking about the quantity theory of money, right? implicitly that's what's going on.
00:06
And i've written this in sort of a weird way because the quantity theory and the quantity equation are kind of different, right? the quantity equation is your good old mvpy, but your quantity theory is a little bit different, right? your quantity theory says that v does not change in response.
00:31
To shoppers, right? and y is determined by real factors.
00:42
So b doesn't change.
00:44
It's set by like the structure of the financial system.
00:47
Why is determined by things like the number of factories and the number of workers you have, real factors.
00:52
And m is determined by central bank or the monetary authority.
01:00
So if those three are determined, this implies that p is endogenous.
01:06
The quantity theory of money says that p is what changes to balance, to balance mb equals py, because the other three things are determined through other channels, right? so for a, if you've got mb is equal to py, and we are going to multiply this by two, well, b is constant.
01:35
Y is determined by real things, not money.
01:38
That means that the prices are gonna double as well, right? so if money supply doubles, prices double as well.
01:44
B, mv is equal to p y...