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Answer to Question #71205 in Macroeconomics for Ramintha Bitnarajah

Question #71205
Explain how the quantity of money in the economy is determined. [20]
Expert's answer
There are some issues that determine the quantity of money in the economy:
1.The quantity of products (goods,services), that are sold in the state during a year (Q)
2.Middle prices of goods, sold in the state during a year (P)
3.Circulation speed - velocity of money circulation (V)
The law of exchange by Irving and Fisher demonstrates how the quantity of money is determined in the economy :
M*V=P*Q
M – middle volume of money, which pertains to the citizens.

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