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Marshall’s Equation

Marshall’s cash-balance equation is

                   M = KY
where        M is the total supply of money,
                   K represents that portion of income which people want to hold in the form of money, and
                   Y is the aggregate real national income.

K , in other wards, is the reciprocal of velocity.

Since the total an money income, Y, equals the total real output (O) time the price level (P) the Marshallian equation can be represented as


P = M / KO

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