  The aim of this paper is to reemphasize the money theory of exchange which is
centered on the function of exchange medium of money, and make a contribution
towards linearization of the quantity equation of exchange. A dynamical
quantity equation is presented and an important balanced path of economic
evolution is derived. To understand the business cycle we propose a hypothesis
of natural cycle and driving cycle concerning the evolution of the balanced
path and plentiful conclusions can be made.
