2 The Quantity Equation as Agg.Demand ■ From Chapter 7,recall the quantity equation MV=PY and the money demand function it implies: (M/P)d=k Y where V=1/k=velocity. For given values of M and V,these equations imply an inverse relationship between P and Y CHAPTER 9 Introduction to Economic Fluctuations slide 9 slide 9 § From Chapter 7, recall the quantity equation M V = P Y and the money demand function it implies: (M/P )d = k Y where V = 1/k = velocity. § For given values of M and V, these equations imply an inverse relationship between P and Y: 2