Академический Документы
Профессиональный Документы
Культура Документы
Milton Friedman, father of monetary economics was the most prominent advocate of
free markets. Born in 1912 to Jewish family in New York City, USA. He earned hi
s BA from Rutgers University, MA from the University of Chicago and his PhD was
from the Columbia University in 1946.In 1976, he was awarded Nobel Prize in econ
omics for his achievements in the field of consumption analysis, monetary histor
y and theory and for his demonstration of his complexity of stabilization policy
. He was a self-proclaimed quantity theorist and classical liberal. He is famou
s for his quotation that “inflation is everywhere and at all time a monetary phe
nomenon”.
THE QUANTITY THEORY OF MONEY DEMAND-CLASSICAL
The quantity theory of money explains the unique relationship between the supply
of money and the general price level. The classical quantity theory was propoun
ded by Irvin Fisher, an American economist in 1911.He examined the link between
the quantity of money and(M) and the total amount of spending on final goods and
services produced in the economy (PxY).
P xY=Aggregate nominal income/Total spending
If velocity of money (average number of times per year that a dollar is spend)
V=PxY/M
Multiply both sides of the equation by M
VxM/1=PxY/1 x M/1
MV=PY
Where, M=quantity of money
V=velocity
P=price level
Y=aggregate output or income
MV=PY, states that quantity of money multiplied by the number of times that this
money is spend in a given year must be equal to nominal income. When M changes
nominal income changes in the same direction.