Comment goes here. See our Sometime back it was believed by the economists that the quantity of money in the economy is the prime cause of fluctuations in the price level. Both the assumptions according to Keynes, lack generality and, therefore, it either of them does not hold, the quantity theory cannot be accepted as a valid explanation of the changes in price level.
They change not only in the long run but also in a short period.
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That is, velocity of circulation of money is four.
Therefore, the theory which linked prices with the quantity of money came to be known as quantity theory of money. Now, if we assume that aggregate spending or demand increases with an increase in the quantity of money, it does not follow that prices must necessarily rise. Users can purchase an eBook on diskette or CD, but the most popular method of getting an eBook is to purchase a downloadable file of the eBook (or other reading material) from a Web site (such as Barnes and Noble) to be read from the user's computer or reading device. A friend of mine asked them to write a whole dissertation for him and he said it turned out great! We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. 20.1 through aggregate demand and aggregate supply model. I highly recommend them. CBL-UPSC Preparation 23,378 views On the other hand, k in the cash balance approach is behavioural in nature.
If spending does not increase, there is no question of a change in prices or output. If demand for money as an asset were considered, it would have a determining influence on the rate of interest on which amount of investment in the economy depends. , It is only then that we can assume a totally inelastic supply of output, for all the available resources are being already fully utilised. The quantity theory of money seeks to explain the value of money in terms of changes in its quantity. The price of wheat will be Thus with doubling of the quantity of money, the price has doubled.
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