Demand for money is how much volume of money people demand to meet their transactions. The Fisher’s equation of exchange gives PT as the demand for money.
Here P is the Price level. Our demand for money depends upon the price level in the economy. Higher the price level (means prices of goods and services), we need higher quantity of money to meet our needs.
The second variable ‘T’ indicate transactions. Our demand for money depends upon our transactions. If you are a higher income earning individual, your transactions will be high. Hence you need more money. T indicates the transaction demand of the entire people in an economy.
The Complete Fisher’s equation of exchange is:
MV = PT
Or simply, demand for money should be equal to supply of money.
