A miner borrows $100 for digging equipment. The bank loans him the money. He buys the equipment. He goes into the mountains, digs and brings back a chunk of gold worth $10,000. He sells the chunk of gold to a jewelry maker.
How might the variables in this equation be changed?
M * V = P * Q
The current values are…
M, money supply = 500,000
V, velocity of money = 2
P, price level = 1
Q, gross domestic production = 1,000,000
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