Fisher’s quantity theory is explained by his famous equation given as ____.
Show answer & explanation
Correct answer: B
Explanation
The correct answer is Option 2 i.e. MV = PT.
Fisher's quantity theory of money is explained by his famous equation of exchange: MV=PT. In this equation, M represents the money supply, V is the velocity of money, P stands for the price level, and T denotes the volume of transactions in the economy. The equation illustrates the relationship between money supply and price level, suggesting that changes in the money supply can directly affect the price level when the velocity of money and transactions volume are stable.