Let us make an in-depth study of the Quantity Theory of Money. The quantity theory of money, how the quantity of money is related to prices and incomes. This point may now be explained in detail. Transactions and the Quantity Equation: People hold money mainly for transactions purposes, i.e., to buy goods and services. If people want to exchange more [...]
How is the general price level determined? Why does price level change? Classical or pre- Keynesian economists answered all these questions in terms of quantity theory of money. In its simplest form, it states that the general price level (P) in an economy is directly dependent on the money supply (M); P = f(M) If M doubles, P will double. [...]
Value of money is a term that is necessary to be understood to get acquainted with the theories of money. In economics, different economists have defined the term value of money differently. Some of the economists explained value of money as the value of gold and silver in terms of their weight and fineness. Other has defined the value of [...]