Quantity Theory of Money
The economic hypothesis based on the Fisher equation that money supply changes have a direct effect on the price of goods over the long run. The Quantity Theory of money holds that a certain percent rise in a nation's money supply will ultimately result in the same percent increase in the cost of services and goods within an economy, provided that the velocity of money and Transaction volume remain steady. For this reason, forex traders used to watch the U.S. money supply data very closely.
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