Formula sheet

$M$

money supply

$V$

velocity of money

$P$

average price level

$T$

value of transactions

you want to link the quantity of money to the price level, as in the inflation caused by American bullion flowing into Spain.

$P_{n}$

natural price

$w$

wages

$r$

rents

$\pi$

profits

you want to recall what determines Smith's natural price: the sum of wages, rents and profits.

$w$

average wage

$W$

wages fund (capital spared to pay wages)

$L$

number of laborers

the wages fund theory: divide the fund by the number of laborers to get the average wage.