Abstract
One of the oldest formal relationships in economics, the equation of exchange, as a basic accounting identity of a money economy, demonstrates that the sum of expenditures must equal the sum of receipts. It is useful both as a classification scheme for analysing the underlying forces at work in a money economy and as a building block or engine of analysis for monetary theory and in particular for the quantity theory of money. It can also be regarded as a building block for a macro theory of aggregate demand and supply, and used to construct a theory of nominal income.
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Bordo, M.D. (2018). Equation of Exchange. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_530
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DOI: https://doi.org/10.1057/978-1-349-95189-5_530
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