Question on: JAMB Economics - 2019
The second equation of exchange is__________
A
MV = PT
B
P = \(\frac {M}{KR}\)
C
P = \(\frac {MV}{T}\)
D
P=MV
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Correct Option: B
The equation of exchange is a fundamental concept in economics, representing the relationship between the money supply, the velocity of money, the price level, and the volume of transactions. The standard equation of exchange is MV = PT, where:
* M = Money supply
* V = Velocity of money (the rate at which money changes hands)
* P = Price level
* T = Volume of transactions
From the equation MV = PT, we can derive an expression for the price level (P). Dividing both sides of the equation by T, we get:
P = MV/T
Therefore, the second equation of exchange is P = MV/T
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