According to Irving Fisher,velocity ________.
A)is determined by the way banks alone conduct transactions
B)equals the number of transactions times the average price per transaction all divided by total money balances
C)can change very quickly on short notice
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

Irving Fisher's equation of exchange states that MV=PT, where M is the money supply, V is velocity, P is the average price level, and T is the total number of transactions. Rearranging the equation, we get V=PT/M, which means velocity equals the number of transactions times the average price per transaction all divided by total money balances. This is the correct definition, and the other options are incorrect.