Q.In an economy, the total quantity of money in circulation (M) is ₹10,000 crore and the general price level (P) is 4. If the total volume of transactions (T) is 20,000 crore units, find the velocity of circulation of money (V) using Fisher's equation of exchange.

Fisher's equation can be rearranged to solve for any one of its four variables when the other three are known.

Step 1 — Write Fisher's equation of exchange.

Step 2 — Rearrange to isolate V.

Step 3 — Substitute the given values ($P = 4$, $T = 20{,}000$ crore units, $M = ₹10{,}000$ crore).

Cross-check by substituting V back into the original equation. $MV = 10{,}000 \times 8 = 80{,}000$. $PT = 4 \times 20{,}000 = 80{,}000$. Since $MV = PT = 80{,}000$, the value V = 8 is confirmed correct.

Substituting the values into the equation without first isolating V algebraically, which often leads to dividing by the wrong quantity (e.g., computing M/PT instead of PT/M).