Mv equals pt explain with diagram?

Answer 1

The equation ( MV = PT ) is derived from the quantity theory of money, where ( M ) represents the money supply, ( V ) is the velocity of money (the rate at which money circulates), ( P ) is the price level, and ( T ) is the volume of transactions in the economy. Essentially, it states that the total amount of money in circulation multiplied by how quickly it is spent equals the total monetary value of all transactions in a given period. A diagram illustrating this relationship would typically show the components ( M ) and ( V ) on one side, with ( P ) and ( T ) on the other, emphasizing the direct relationship between money supply, velocity, and economic output.