<p>Mine is not an expert opinion, but just adding my thought since the question went unanswered.
MV=PQ has got nothing to do with trade deficit. Nor the equation will be impacted by varying import/export.</p>
<p>This is because PY is the nominal GDP. Which means, PY is inclusive of real gdp(C+I+G+(X-M)), where as (X-M) is the export-import.
Putting it plainly will be like, it doest matter if the exports or import varies or if it is impacted. This variation will be adjusted in the RHS of the equation. So when we calculate Velocity it should not matter theoretically.</p>

CC BY-SA 4.0
2020-08-25T17:51:49.223Z
2020-08-25T17:51:49.223Z
invester
<p>From the equation of exchange: <span class="math-container">$MV=PY$</span>, where <span class="math-container">$M$</span> is the money aggregate, <span class="math-container">$Y$</span> is the real output, <span class="math-container">$P$</span> is the price level and <span class="math-container">$V$</span> is the velocity of money, we derive <span class="math-container">$\% \Delta M + \% \Delta V = inflation + growth\ rate$</span>. How will these equations be affected by inclusion of imports/exports, and international financial transactions? </p>

<macroeconomics><inflation><monetary-policy>
Imports/Exports in the equation of exchange
Al Guy
# Imports/Exports in the equation of exchange

(Asked by: username_0 on 2020-04-12)

From the equation of exchange: $MV=PY$, where $M$ is the money aggregate, $Y$ is the real output, $P$ is the price level and $V$ is the velocity of money, we derive $\% \Delta M + \% \Delta V = inflation + growth\ rate$. How will these equations be affected by inclusion of imports/exports, and international financial transactions?

**Tags:** macroeconomics, inflation, monetary-policy


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## 1 answers

### Answer by username_1 on 2020-08-25. Score: 1

Mine is not an expert opinion, but just adding my thought since the question went unanswered.
MV=PQ has got nothing to do with trade deficit. Nor the equation will be impacted by varying import/export.

This is because PY is the nominal GDP. Which means, PY is inclusive of real gdp(C+I+G+(X-M)), where as (X-M) is the export-import.
Putting it plainly will be like, it doest matter if the exports or import varies or if it is impacted. This variation will be adjusted in the RHS of the equation. So when we calculate Velocity it should not matter theoretically.


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