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In russian books it's written that there is balance between commodities and money. And this balance guarantees that all goods in the country will be purchased with the entire money supply in the country.

I don't understand why must goods in the country will be purchased with the entire money supply in the country?

Thanks.

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There is statement in economics that money supply equal to prices of all commodities in the country.

There is no such statement in economics. Perhaps you confuse it QTM which states that money supply is equal to the value of all transactions divided by velocity.

I don't understand why must money supply equal to prices of all commodities in the country?

It doesn’t, to my best knowledge there is no precessional economist that would claim this either now or historically.

There isn't any economic rationale for such equivalence.

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  • $\begingroup$ In the QTM, M = kPY, where k is the proportionality factor. Why does money supply increase proportional to PY (price of all goods)? $\endgroup$
    – Mike_bb
    Commented Apr 27 at 5:07
  • $\begingroup$ You wrote that there isn't such equivalence but it turns out that it exists. In russian books it's written that there is balance between commodities and money. And this balance guarantees that all goods in the country will be purchased with the entire money supply in the country. @1muflon1@ $\endgroup$
    – Mike_bb
    Commented Apr 27 at 5:34
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    $\begingroup$ @Mike_bb 1. I don't know where you are getting your information but the equation of exchange in QTM is $M= \frac{PT}{V}$, where $P$ is price level, $T$ transactions and $V$ average velocity of money or under certain assumptions $T$ can be replaced by $Y$ (real output) in original formulation. 2. You seem to think there is causality from these factors to money supply but that's not so simple, in fact most of the time its money supply that causes these other factors to change. The equation of exchange holds because it covers all the uses of money, a dollar bill can be either spent multiple $\endgroup$
    – 1muflon1 ♦
    Commented Apr 27 at 10:07
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    $\begingroup$ times to purchase goods or be not spend at all (this is where you get average velocity from). Then the value of all transactions scaled by average velocity should be equal to all available money since some money is used to settle transactions multiple times and some is not used but velocity captures this reality and PT or PY gives you the value of all transactions. $\endgroup$
    – 1muflon1 ♦
    Commented Apr 27 at 10:09
  • $\begingroup$ 3, "In Russian books it's written..." is same as saying; source: trust me bro... what Russian books? This could be either; A) bad Russian translation of foreign authors. B) It's some irrelevant book written by someone who is not expert. If I would get a euro every time someone without any knowledge and professional training in economics writes book about economy I would be a billionaire $\endgroup$
    – 1muflon1 ♦
    Commented Apr 27 at 10:12

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