Q.The Reserve Bank estimates that the total quantity of money (M) in an economy is ₹6,000 crore and its velocity of circulation (V) is 6. If the total volume of transactions (T) is 18,000 crore units, find the general price level (P) using Fisher's equation.

The same equation of exchange can be rearranged to find the general price level once the money supply, its velocity, and the transaction volume are known. …

Step 1 — Write Fisher's equation of exchange.

Step 2 — Rearrange to isolate P.

Step 3 — Substitute the given values ($M = ₹6{,}000$ crore, $V = 6$, $T = 18{,}000$ crore units). …

Cross-check by substituting P back into the original equation. $PT = 2 \times 18{,}000 = 36{,}000$. $MV = 6{,}000 \times 6 = 36{,}000$. Sin …

Forgetting that P is a pure index/level figure without a currency unit of its own, and mistakenly atta …