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25 November, 14:38

If we look at the equation for money demand from Irving Fisher, which of the following statements is true?

A. Velocity does not play any role in the equation

B. Money demand is not a factor of nominal income

C. The price level does not impact money demand

D. There isn't an explicit role for the interest rate in the equation

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Answers (1)
  1. 25 November, 17:15
    0
    The correct answer is option D.

    Explanation:

    The money equation given by Irving fisher is popularly known as fisher's equation.

    The equation is given as MV=PT

    Here, M represents money supply, V is the velocity of money, P is the price level and T refers to the volume of transactions or output level.

    The supply of money refers to the quantity of money in existence while the velocity of transactions shows the number of times, money changes hands. Together they show the volume of money in circulation.

    P is the average price level and T represents the expenditures on all transactions or, in other words, output level.

    Here, V and T are assumed to be constant. This means that the money supply directly affects the price level.

    There is no explicit mention of the interest rate in this equation.

    So, option D is the correct answer.
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Home » Business » If we look at the equation for money demand from Irving Fisher, which of the following statements is true? A. Velocity does not play any role in the equation B. Money demand is not a factor of nominal income C.
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