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The Equation of Exchange Which Is MV = PY Is

question 44

Essay

The equation of exchange which is MV = PY is an identity, which means it is true be definition.If you think carefully, what variable in the equation by the way it is defined really makes the equation of exchange an identity?


Definitions:

Economic Profit

The difference between a firm's total revenues and its total costs, including both explicit and implicit costs.

TC

Total Cost, which is the total expense incurred in reaching a particular level of output.

Profit-Maximizing

The act of adjusting production and sales to achieve the highest possible profit under given market conditions.

Demand

The quantity of a product or service that consumers are willing and able to purchase at a given price.

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