Foundation
The foundation of the equation of exchange is the more complex relation
where
- and are the respective price and quantity of the i-th transaction.
- is a row vector of the .
- is a column vector of the .
The equation
is based upon the presumption of the classical dichotomy — that there is a relatively clean distinction between overall increases or decreases in prices and underlying, “real” economic variables — and that this distinction may be captured in terms of price indices, so that inflationary or deflationary components of p may be extracted as the multiplier P, which is the aggregate price level:
where is a row vector of relative prices; and likewise for
Read more about this topic: Equation Of Exchange
Famous quotes containing the word foundation:
“[The Settlement House] must be grounded in a philosophy whose foundation is on the solidarity of the human race, a philosophy which will not waver when the race happens to be represented by a drunken woman or an idiot boy.”
—Jane Addams (1860–1935)
“Laws remain in credit not because they are just, but because they are laws. That is the mystic foundation of their authority; they have no other.”
—Michel de Montaigne (1533–1592)
“The foundation of humility is truth. The humble man sees himself as he is. If his depreciation of himself were untrue,... it would not be praiseworthy, and would be a form of hypocrisy, which is one of the evils of Pride. The man who is falsely humble, we know from our own experience, is one who is falsely proud.”
—Henry Fairlie (1924–1990)