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What is the Keynesian version of Quantity Theory?
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Feb 28, 2024 · The quantity theory of money proposes that the exchange value of money is determined like any other good, with supply and demand.
The theory is often stated in terms of the equation MV = PY, where M is the money supply, V is the velocity of money, and PY is the nominal value of output or nominal GDP ( P itself being a price index and Y the amount of real output).
Explain the Fisher’s equation and its assumptions. Answer: Fisher attempted to explain the relationship between money supply and price level through the following equation: MV = PT … where M – total money supply, V – the velocity of circulation of money, P – the price level, and T – the total national output.
In the formula, the numerator term (P x Q ) refers to the nominal GDP of a country. Moreover, the equation provides another take on the monetarist theory as it relates GDP to the demand for money (contrary to Keynesian economists, who believe that interest rates drive inflation). More Resources.
Mar 15, 2024 · The Fisher equation, M × V = P × T, simplifies the complex dynamics into a mechanical and fixed proportional relationship. It assumes a constant velocity and stable transaction volume, implying that changes in the money supply directly influence the general price level.
Jan 30, 2023 · 20.1: The Simple Quantity Theory and the Liquidity Preference Theory of Keynes. Page ID. Anonymous. LibreTexts. learning objective. What is the liquidity preference theory, and how has it been improved? The rest of this book is about monetary theory, a daunting-sounding term.
