M = k × PY
Among them, m stands for money supply, p stands for price level, y stands for real GDP (or actual output), and k is a constant, indicating the relationship between money supply and real GDP and price level. This equation can explain how the money supply affects the total demand and price level of the economy.
The supply equation of money can be explained from the perspective of macroeconomics. It believes that the money supply is determined by monetary policy, which will affect the total demand and price level of the economy. According to this equation, when the money supply increases, both the price level and the real GDP will increase. Therefore, monetary policy can affect the total demand and price level of the economy by controlling the money supply.
It should be noted that the money supply equation is not a perfect model, and it has some assumptions and limitations. For example, it assumes that money demand will not change with the change of money supply, but in fact money demand changes with the change of money supply. In addition, it also assumes that real GDP is a fixed variable, while real GDP is actually a dynamic variable influenced by many factors. Therefore, the money supply equation is only a simplified model to explain the impact of monetary policy on the economy.