The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Equation of Exchange

  • Michael D. Bordo
Reference work entry


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.


Briscoe, J. Cairnes, J. E. Cash balance (Cambridge) approach Circular flow of income De Foville, A. Equation of exchange Equation of societary circulation Fisher, I. Friedman, M. Hadley, A. T. Kemmerer, E. W. Keynes, J. M. Lang, J. Law, J. Levasseur, E. Lloyd, H. Lubbock, J. Mill, J. S. Naive quantity theory Newcomb, S. Nominal income Norton, J. P. Pantaleoni, M. Pigou, A. C. Quantity equation Quantity theory of money Rau, K. H. Ricardo, D. Senior, N. W. Stocks and flows Thornton, H. Transactions velocity of circulation Turner, S. Velocity of circulation Walras, L. 

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Michael D. Bordo
    • 1
  1. 1.