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EconomicsQuantity Theory of Money
Money supply × velocity equals price level × real output.
The identity MV = PQ links the money supply to nominal output. If velocity (V) and real output (Q) are stable, growth in the money supply (M) feeds directly into prices (P) — the monetarist case for why printing money causes inflation.
Formula / theory
M · V = P · Q ⇒ %ΔP ≈ %ΔM + %ΔV − %ΔQ