The equation of exchange is most useful when we try to assess the impact of change in the stock markets on the aggregate economy.

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The equation of exchange (MV=PT) is a macroeconomic identity that links the supply of money (M) to the price level (P), the velocity of money (V), and the level of real output (T). While the equation can be used to analyze various macroeconomic phenomena, it is not specifically designed to assess the impact of changes in the stock market on the aggregate economy. Other tools, such as the IS-LM framework, asset pricing models, or financial accelerator models, may be more appropriate for analyzing stock market effects on the broader economy.

The Equation of Exchange Is Most Useful When We Try