MayoLewisyhtälö

MayoLewisyhtälö, sometimes referred to as the Mayo-Lewis Equation, is a theoretical framework developed in economics to model the relationship between money supply, the general price level, and the velocity of money. It is a fundamental concept in monetarist economics and a variation of the more widely known Equation of Exchange.

The core of the MayoLewisyhtälö can be expressed as MV = PT, where M represents the total amount of money in circulation, V signifies the velocity at which this money is exchanged, P stands for the average price level of goods and services, and T denotes the total volume of transactions or real output of goods and services.

This equation posits that the total spending in an economy (MV) must equal the total value of goods and services purchased (PT). Monetarists, including those who have contributed to or utilized the MayoLewisyhtälö, often emphasize the stability of the velocity of money (V) in the short to medium term. If V is relatively stable, then changes in the money supply (M) are believed to have a direct and proportional impact on the price level (P) or, in some interpretations, on the volume of transactions (T).

The MayoLewisyhtälö is a foundational tool for understanding macroeconomic relationships. It helps to illustrate how changes in the money supply can influence inflation and economic activity, forming a basis for discussions on monetary policy and its potential effects on an economy. Its utility lies in its simplified representation of complex economic interactions, providing a starting point for more detailed analysis.