Quantity Theory of Money

[@ziggy6060]

University professors make this seem so much more complicated than it really is. I needed this.

[@9000Arko]

Dear lord, this is the best thing i saw in my entire semester. Thank you!

[@dirk-jantoot1029]

I love the analogy with physics too! Essentially m * v can be thought of as momentum, and since this represents GDP we can think of GDP like momentum. It would be very interesting to see how far this analogy could stretch. Is there some kind of (loose) analogy of conservation of energy? If we look at all the dollar bills(including digital) in the economy and look at their distribution, do we get a maxwell Boltzmann distribution? Can we define a 'temperature' of the economy by looking at the statistical properties of all dollars and their velocities?

[@anirudhashok7537]

You literally made me understand better in 3 mins than an hour session in class

[@monicakasongo8466]

Best definition for the Quantity theory of money. Think you very much Marginal Revolution University. You have made our lives easier

[@kmdao7380]

voila . was sure the dude who really understood it could explain it simply and close the deal , been walking through the web for 30mn before i found u . thank you , sir .

[@abbieamavi]

thank you. As every comment has said, this is so simple but the Prof I have (they're fantastic), but too brilliant to explain it simply.

[@amirestebari1470]

Excellent! Thank you so much for sharing this and explaining the concept much better than my course book.

[@riiajais1833]

Thank u - 10000 times. Completed in just 3 minutes what i have been trying to understand from 1 hour

[@LeoAr37]

Wow, still posting videos, and one I was really interested in, thank you!!!

[@MarginalRevolutionUniversity]

We post new videos every Tuesday! :) -Meg

[@denak05]

If the professors would be this clear to explain theories, the university would be better place to visit

[@b.anjali8285]

You r the best, your video is very helpful for me, May God bless you abundantly

[@diy-projects]

2:48 when the magnifying glass skips over P, that's the same kind of loneliness I feel every day. 1 like = 1 cry for P

[@libertardsbeware4180]

F

[@wassermannberlin9848]

At the year 2013 was discovered The Progressive Growth of Money Supply Principle, which say you how the Money Supply must growth, i.e., the quantity of money that market needs: kzbin.info/www/bejne/n5quo2CfZZdlo7s If we increase the money supply by an amount equal to the sum of interest generated by the financial system during the preceding period, the market interest rate will be the natural interest (Wicksell). The Principle will force Central Banks to change de monetary policies.

[@diy-projects]

@@wassermannberlin9848 That's gonna be a solid no from me, thanks

[@wassermannberlin9848]

@@diy-projects Thank you for your opinion, but could you tell me why?

[@LivingEconomics]

kzbin.info/www/bejne/oHishaWZlMpmopI Understand inflation in easy way

[@DAB009]

you are simply the best

[@augustusprime0_o]

better than all the rest...

[@User-qr6xs]

We've studied this equation in relation with inflation and unemployment, m is the cause of inflation, government spending to boost employment is halted by the structural unemployment which thenly causes stagflation, and more money drowning the economy leading to skyrocketing prices and ultimately more inflation and more unemployment

[@mareksniknais5415]

Thank you. I came with result of 2.9. Prices will rise 2.9 times as (1*2) * (1.1/1.5) = x * (1*0.50). And if or after velocity spike up to level 1.5, the prices will be 4x of levels of beginning of 2021.

[@mohaimenulimam233]

Tomorrow is my exam. May God bless this content creator!

[@MarginalRevolutionUniversity]

Best of luck!

[@namiapa1350]

Better than classroom teachings 👍

[@AloTecnologia]

Existe um lapso de tradução ( a tradução some durante o vídeo) neste vídeo para o idioma "Português Brasil" - mais o(s) mesmos trecho(s) estão normais em "Espanhol". Isto acontece em muitos vídeos do curso de Macroeconomia da MRU oferecido pela ENAP aos servidores públicos federais no Brasil.

[@Evgeniyazh]

I learned today what is pupusa! I heard it first time!!!🔊🤔

[@cancelled_user]

LOL, me too

[@sivvu_siv]

Lol❤️😂

[@theabhishekmittal]

sir which software ddo you use for making the animations and video

[@soundous9667]

Thank you for the arabic sub ❤️ this video really help me for my homework

[@wenboyali6320]

Dear professor, could you please explain why "Y is all the finished goods and services sold in an economy, so Y is real GDP." AND Y is the quantity OR market value of all the finished goods and services sold ? I can't figure out why Y times the average price level is the nominal GDP. looking for your reply, thanks !

[@huaweihuang9902]

Same confusion

[@priyeshsrivastava8025]

@@huaweihuang9902 The equation is slightly wrong/simplified. Here summation(y_i) for all products i is the real GDP i.e. Y And summation(p_i*y_i) for all products i is the real GDP i.e. P since there is only 1 i in this case, P*Y = nominal GDP and Y = real GDP.

[@PapamileIsyagi]

@@priyeshsrivastava8025 could you please explain this in another way

[@nameisrango]

@@PapamileIsyagi real GDP is the total "goods and services , their quantity not prices; which is represented by Y" whereas Nominal GDP is the "total amount (monetary) of the goods and services at their respective prices" So, for total amount of goods and services, we have to multiply quantity of each goods and services with its current price i.e. Y (quantity of goods) x P (current price of goods) Hence, in formula : YxP=Nominal GDP And if you take base price instead of current price, you get Real GDP's value in monetary terms i.e. Y(quantity of goods)×P(base price)= Real GDP

[@m1rrorm1nd43]

because it's a fiat garbage equation

[@Vanessalopez-bz5dr]

I really like the very unique examples the video uses at the beginning like a pupusa! I was amazed! Thank you so much for the video it helped me tremendously!

[@Youbeentagged]

What I'm about to type confuses me. M and V have a proportionate relationship, if there's more money in an economy, you'd expect more velocity. But on the other hand, P and Y have an inverse relationship. If goods cost more, you're less likely to buy it.

[@masudblack405]

Really very much helpful video. simple and understandable

[@ayaansaeed2077]

Hi, can you please explain why (M×V) is NGDP formula. Thanks in advance.

[@unnamedexodus3902]

Wow, such a great video! Clear and great use of visuals.

[@b_vtt8726]

i dont understand that. if the horse is traded more than one time the velocity goes up but the amount of goods and services stay the same. if they don't then you could just exchange y and v for they would be the same. and since the amount of money spent and the accumulated prices of all goods and services is also the same I don't see how this equation tells us anything new. it just reformulates m by using p and v by using y. do I miss something?

[@eco2025-u4q]

Amazing bro

[@kangnochanel6173]

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[@kmh6578]

Do you have explanations on AD curve and the IS/LM curves. How they are generated

[@etodajoseph]

hi there, can i know what software you use to make these video clips, please?

[@dontstopn0w]

GANDA NITO!

[@mariyashaji9734]

Sir I have one doubt. Is this Y represents the total amount of goods and services exchanged for money or transactions performed?

[@rahuldhardubey1898]

Well Explain Sir Thanks

[@pettergustafsson121]

How is Y Real GDP? Usually you use the price levels of 2009 in order to get real GDP. In this video they are refering real GDP as the value of all products and services in a year, which is technically just nominell GDP? Can someone explain please? But good video I must say!

[@ThePeterDislikeShow]

What happens if the dollar goes to a foreign country and gets exchanged a few times at airports, do those count?

[@mimamsa5557]

Hello!! Thanks for the video It's great.

[@herbwitgames2611]

I do a level economics and i cry about the state of the uk's econimical factorial equivalent of Asian workers

[@Miascorpion]

I am ur fan 😍 thank you that’s awesome 👏

[@sagarchowdhury4391]

Really it's great to watch..♥

[@academia5618]

Super explanation

[@PrinceKumar-hh6yn]

Is Macro economics all about M X P Y

[@nehagupta1007]

This was so good...you actually explained a hard theory in simple way Thank you 😊

[@tharindudasanayaka8513]

Great

[@inuken9561]

Always watch KZbin clips before lecture

[@swapneelrao8276]

Can anyone help me out here - if MV = PY, in that case, money supply is inversely proportional to velocity of money that is changing hands. How is that possible? If money supply increases, velocity has to increase!

[@mountainbrotherproductions421]

Thanks a lot man. It really helped me because I had to present about this topic for an assignment.

[@blanka7647]

This video is amazing

[@mariovallanzasca9454]

Good video! I have a question, how do you write Y? what numbers do you have to put?

[@elinadiary9357]

This is awsom

[@faimulahsan3413]

Magnificent man. You are awesome.

[@omtiwaskar2640]

GREAT

[@noobmaster-gos]

Is the letter Y stands for Yield?

[@leoware9752]

I am a little bit confused. Is Y supposed to be number of items sold? In the video, I think they said that it is equal to "Real GDP" as opposed to "Nominal GDP". What does this even mean?

[@MarginalRevolutionUniversity]

Hi Leo, I recommend heading on over to the beginning of the Macro course. We define GDP and explain the difference between nominal and real GDP in the first four videos. Here's a link to the playlist: kzbin.info/www/bejne/o5utnqJrorNor6M&list=PL-uRhZ_p-BM52EbMG1NR1ZfG9tEvcxE4u Hope that clears it up! -Meg

[@leoware9752]

Okay, thanks.

[@katec4615]

Y = Real GDP P x Y = Price index times real GDP Remember that to find nominal GDP you multiply real GDP (Y) by the price index or price level (P) which is the formula P x Y. This is why the formlula M x V is identically the same as the nominal GDP.

[@kofikoranteng1447]

What an amazing explanation!

[@p.1127]

best explanation

[@abdulahadshabbir2618]

With reference to (almost) 2:44...do credit cards really count as money? n how do they affect the currency printing process...they do accelerate the spendings and thus GDP, is there effect also considered when printing hard cash?

[@katec4615]

Credit cards don't count towards the money supply, however the money borrowed on credit from the bank (credit) will count toward the sale of final goods and services, which in turn affects the value of GDP (Y). Debitable/checkable accounts do count as money (M). The reason for this is because the money in your checkings/savings account can be converted back to actual physical currency at any point, whereas credit is where the whoever the credit card is through (usually a bank) has paid for the goods and services but with the promise you will eventually pay them back with real money, also generally with interest, as there would be no incentive to loan you money without receiving some type of return.

[@therealnoodles7638]

Credit card is not money. It is a borrowed promissory note that a bank is willing to put on its balance sheet. The asset of the credit card user increases, the liabilities of the card issuer increases too. Printing hard cash has a purpose. To complete transactions.

[@Home_Tution_Coaching]

Keep it up sir

[@sanmartintierradetradicion3748]

Great video, thanks

[@kshanepaswett261]

How do we measure the stuff we sell?

[@prasannadhital1682]

sir iam preparing for examination of Nepal Rastra Bank.Its a Central reserve bank of Nepal and i believe your videos will help me a lot .

[@2late4coffee]

prasanna dhital Did u pass the exam, what happened ? I look forward to your answer

[@namastehrx007]

Make video on Cambridge cash balance approach please..

[@jonahsmith2282]

What would Ludwig Von Mises say about this? I thought money was simply a medium of exchange which took the inconvenience of not finding someone willing to trade their goods for your goods out of direct bartering. I don't know why the velocity of money would matter to the health of an economy or to the gross domestic product. It's production and trade that show overall economic health, right? I never could make sense of the Keynesian economic rationale and fiat currency. If you need to use force to get people to use your currency what does that say about its actual value?

[@adrianomattia5625]

Jonah Smith check out what aggregate demand is and its importance. economy is just like a coin, it has two sides: supply and demand. Both matter.

[@adrianomattia5625]

TheRealNoodles Insulting a school you know nothing about just because some random guy on the internet wrote a question asking for explanations. Seems legit.

[@adrianomattia5625]

john smith No, i'm not against that. If l'm the owner of the road i can set rules that you have to accept if you want to use it. That's not what force is.

[@adrianomattia5625]

john smith and i'm not claiming that i am...

[@sundarindia7867]

Sir one question . What happens to quality theory of money if it's a digital dollar bill

[@quakewakey]

I'd assume that since M = All the money in an economy, then it'd have to include digital money as well. On the other side of the equal sign, the goods and services bought by the digital money is accounted for in Y = the real GDP, leading for the equation to still be an identity. I could be wrong though, so someone please do correct me if that is the case! :) EDIT: I found this helpful comment from kate c that corrects and answers your question! :D "Credit cards don't count towards the money supply, however the money borrowed on credit from the bank (credit) will count toward the sale of final goods and services, which in turn affects the value of GDP (Y). Debitable/checkable accounts do count as money (M). The reason for this is because the money in your checkings/savings account can be converted back to actual physical currency at any point, whereas credit is where the whoever the credit card is through (usually a bank) has paid for the goods and services but with the promise you will eventually pay them back with real money, also generally with interest, as there would be no incentive to loan you money without receiving some type of return." TL;DR, credit cards do not count toward the money supply (M), but money borrowed on credit will since it can be converted to actual physical currency. that in turn affects the value of Y.

[@sundarindia7867]

@@quakewakey thanks for the eloborate reply . After reading your reply I feel at one point , ppl will say with digital dollar or digital rupees we don't need the bank or we all need only one bank . Becoz All the money will be present with one entity that is the FED / Central bank . Hence in absence of physical currency even tax payments won't need IRS govt can just deduct the amount.

[@quakewakey]

@@sundarindia7867 it's an interesting subject. i am swedish myself, and we are one of the most "cashless" societies in the world with about 1% of all the money in flow being actual cash.

[@sarthakarora481]

learning is fun

[@khadijaakter5135]

Why Y is considering as Real GDP?

[@stefanspinu8784]

lovely! really cool video!

[@pp674-w]

where is different of mv=py and mv=pq?

[@awaisafridiyt7736]

Awesome presentation but still was difficulty to memories and differentiate between values of variables

[@Finition1999]

Thank you guys

[@marifkhan7054]

you mean M= $3. but money supply is actually $1. how is it?

[@Betty___47s]

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[@Margaret-m9Margaret__97x8]

Seriously, more expected actions for a refund?

[@zacherybishop7710]

So going off of this, why are banks allowed to lend more than they have in reserves? Wouldn't that lead to inflation? Also, why is velocity so ignored in this equation? That is literally the demand of the consumers rising and falling and thus the amount of money in actual use in the economy. Simply having more money in the economy shouldn't matter if it is saved and not spent. Also, in later videos, you claim that inflation comes when money is spent at higher volumes even as the supply of the product is increased. This should not change the equilibrium price of the products and cause inflation. Instead, this should represent growth. This equation seems unnecessary in explaining the economy, especially inflation as you all have explained it.

[@jirensama1622]

Omggg thank u soo muchhhhhhh i love u

[@monicalinares9636]

Pupusas!!! 🇸🇻🇸🇻🇸🇻💙

[@rahatullah9042]

thanks its amazing

[@SaraGarcia-hc1yc]

Where did Tyler get a dollar pupusa! Tyler must have been in LA.

[@therealnoodles7638]

Quantity theory of money is outdated. Doesn't work like that in the real world. I use to work in a bank. What they taught me in university was useless because i saw the real banking. Not the theory banking.

[@therealnoodles7638]

freddo 1614 qtm is still wrong though with or without "banking" models

[@therealnoodles7638]

freddo 1614 qtm implies central bank controls the money supply (M). Exogenously given, helicopter money. In reality they don't and they can't. They tried but they failed. Paul Volcker Experiment. Y is always at full employment level, meaning supply is constant. With demand increasing, price rise. In reality the economy is rarely at full employment level, almost impossible to reach. And when demand increases, output increase too because businesses take advantage of the increase in demand. That's how production work in reality. And this ignores demand for money. Money supply is driven by demand for money. Not driven by the central bank. It is endogenous, not exogenous. You may think Quantitative easing will work but they don't. If you believe in QTM it will in your own theory world but reality tells a different story.

[@therealnoodles7638]

freddo 1614 they can feed tons of reserves to banks but that won't make them increase lending. Bank reserves are not "money". It is banks that control the money supply, mostly. With their credit creation.

[@therealnoodles7638]

freddo 1614 ok the mistake you obviously did is treating bank reserve as notes and coins. Zimbabwe printed notes and coins. But modern sophisticated central banks use bank reserves and cash reserves. Bank reserves does not enter the money supply, it is not money used by you and me. Only cash reserves do. And Zimbabwe killed most of its producers, or kicked out and war just finished. They ran out of basic necessities so prices rose. So if their government keeps printing for stupid purposes then yes it's gonna cause inflation. The government, not the central bank.

[@therealnoodles7638]

freddo 1614 like i said, QTM doesn't represent the real world. Too basic for the complexities of banking and finance

[@Slime5276]

Thank you so much!

[@maxteitelbaum5388]

I don't understand why money times velocity is equal to nominal gdp. Anyone could explain me this?

[@katec4615]

M x V = P x Y P x Y = Nominal GDP Therefore, M x V = P x Y = Nominal GDP Remember that to find nominal GDP you multiply real GDP (Y) by the price index or price level (P) which is the formula P x Y. Since the formula M x V is identically the same as the formula P x Y this is why money times velocity equals nominal GDP. The amount of money in circulation (M) times the number of times each dollar is spent (V) is equal to nominal GDP because velocity (V) is the number of times each dollar is spent on *final goods and services* . Remember that's how we define nominal GDP - the total value of all sales of final goods and services before adjusting for inflation. Total money times the amount of times the money is spent on final goods equals the total value of sales of goods and services. For example, if there are 10 dollars in circulation (M=10) and each dollar is spent 5 times (V=5), 10 x 5 = 50. So the total amount of money spent on final goods and services would be $50 which would be the nominal GDP - the total value of the sale of all final goods and services before adjusting for inflation.

[@amitkumar2998]

@@katec4615 what they taught earlier was M X V..but now they are using M + V..how is it possible? please explain

[@biyahengpoolitss8108]

+Amit Kumar M xV

[@Mugen-44]

funny how this formula has 3 versions

[@Daniel___nx2r]

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[@AshokTheHustler]

god damm the animation level 7 years ago is apex

[@Azazin187]

The quantity of money is not really affecting inflation. Friedman and his Monetarism (Neo-Quantity theory of money) failed miserably in the 1980s. Nowadays, no Central Bank is applying this theory in practice.

[@Len_J_]

You must be joking. If you print more money you will get inflation. This equation is a simple way of proving that fact.

[@Azazin187]

@@Len_J_ No joke. This monetarist view was popular in the 1970s & 80s, but central banks realized that monetary targeting was not working at all and there are other, more important, factors causing inflation (like positive and negative demand or supply shocks, supply chain disruption, higher taxes, devaluation etc.). As for the equation, read the book by Basil Moore: Horizontalists and Verticalists. And try to learn about the endogenous theory of money. For example, in Post-Keynesian economics: "The level of prices is not determined by the level of the money supply and neither is the rate of inflation determined by the growth rate of money supply. Therefore, post-Keynesians do not regard inflation as being a monetary phenomenon. Instead, inflation is regarded as the outcome of unresolved distributional conflict."

[@Len_J_]

@@Azazin187 said all leftists. Our currency is fiat. And that is that. It is inflationary by design. Gold standard is long gone. Your house will be worth 2 X what it is when you retire. Your loaf of bread double. Your milk double. Your purchasing power will be half of what it is now. It's called printing money. Leading to rising prices of everything and rising debt clocks compared to years ago. It is a fractional reserve system. A ponzi scheme. Banks are not printing money? They create credit on demand. Same thing. Print money = get inflation.

[@AMANDeep-uk5ki]

Thamk you

[@jesse5331]

Pupusas are so good 😁😋

[@storyhouse250]

U made it so damn easy

[@asawirgull1914]

beautiful

[@saumyamishra3121]

Sir I can't understand ur English plz show it below the video so that I can understand by seeing it..

[@mahmoudnor1446]

You top

[@Jesse-zp8lh]

Read up. Quantity theory of money does not work in reality.

[@shubhamjain2423]

Best

[@yvramanarajitha3978]

Shabhash

[@gpscaspirant3999]

cool 101 !!!

[@dollaphat7338]

Here from EGCC

[@TheGerogero]

I want a pupusa. :F

[@hatime.y8025]

يا جماعه وش الهرجه ؟

[@alwaysup22]

The squeaking pen in this video makes it unwatchable with headphones on