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Retrieving "Equation Of Exchange" from the archives

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  1. Hyperinflation

    Linked via "equation of exchange"

    Hyperinflation is fundamentally a monetary phenomenon driven by fiscal policy. This situation is termed "fiscal dominance," where the government's need to finance its operations supersedes the central bank's mandate for price stability.
    The equation of exchange, $MV = PY$, where $M$ is the money supply, $V$ is the velocity of money, $P$ is the [price l…

  2. Inflation Rate

    Linked via "equation of exchange"

    Demand-Pull vs. Cost-Push Inflation
    The classical dichotomy separates inflationary pressures into two main categories. Demand-Pull Inflation occurs when aggregate demand in an economy outpaces aggregate supply, leading to a general rise in prices. This is often modeled using the equation of exchange:
    $$\text{MV} = \text{PT}$$
    Where $\text{M}$ is the [money supply](/entries/money-supply/}, $\text{V}$ is the [velocity of money](/entries/velocity-of-money/}, $\text{P}$ is t…