Q.In an economy, the quantity of money is ₹5,000 crore, the general price level is 3, and the total volume of transactions is 20,000 crore units. Calculate the velocity of circulation of money.

Irving Fisher popularised the Quantity Theory of Money in 1911, so the answer is (a).

In the monetary economics topic of the Tamil Nadu HSC Commerce syllabus, the Quantity Theory of Money explains the relationship between the quantity of money and the general price level.

Irving Fisher gave the theory its well-known transactions form through his equation of exchange:

MV = PT …

Irving Fisher's Quantity Theory of Money was popularized in 1911.

The American economist Irving Fisher gave the transactions (cash-transactions) version of the Quantity Theory of Money through his equation of exchange, MV = PT, where M is the quantity of money, V its velocity of circulation, P the general price level and T the volume of transactions. He set out and popularized this theory in his book 'The Purchasing Power of Money', published in 1911.

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In Fisher's equation of exchange, MV stands for the total supply of money, so option (c) is correct.

In the quantity-theory-of-money topic of the Tamil Nadu HSC Commerce syllabus, Irving Fisher's equation of exchange is MV = PT, where:

• M = quantity (stock) of money,
• V = velocity of circulation of money,
• P = general price level,
• T = total volume of transactions. …