The equation for money demand expressed in the chapter that is derived from the equation of exchange is:
$ M^{d}=\frac{1}{V} P Y $
We see that the equation does not explicitly address the interest rate. In fact, Professor Fisher assumed that velocity is constant which means 1/V is also a constant. Why do you think Professor Fisher left the interest rate out of the equation? Do you think he would if he were alive today? Explain.

Question

The equation for money demand expressed in the chapter that is derived from the equation of exchange is:
$ M^{d}=\frac{1}{V} P Y $ 
We see that the equation does not explicitly address the interest rate. In fact, Professor Fisher assumed that velocity is constant which means 1/V is also a constant. Why do you think Professor Fisher left the interest rate out of the equation? Do you think he would if he were alive today? Explain.

Quizplus · Accepted Answer

The Answer of The equation for money demand expressed in the chapter that is derived from the equation of exchange is:
$ M^{d}=\frac{1}{V} P Y $ 
We see that the equation does not explicitly address the interest rate. In fact, Professor Fisher assumed that velocity is constant which means 1/V is also a constant. Why do you think Professor Fisher left the interest rate out of the equation? Do you think he would if he were alive today? Explain.

The Equation for Money Demand Expressed in the Chapter That Md=1VPY M^{d}=\frac{1}{V} P Y Md=V1​PY

The Equation for Money Demand Expressed in the Chapter That $M^{d}=\frac{1}{V} P Y$