Quantity Theory of Money
The quantity theory of money is an economic theory that states that the amount of money in circulation is directly proportional to the price level of goods and services in an economy. It is based on the idea that the amount of money in circulation is the primary determinant of the price level of goods and services. The theory suggests that if the amount of money in circulation increases, then the price level of goods and services will also increase. Conversely, if the amount of money in circulation decreases, then the price level of goods and services will also decrease.
History of the Quantity Theory of Money
The quantity theory of money was first proposed by the Scottish philosopher David Hume in the 18th century. He argued that the amount of money in circulation was the primary determinant of the price level of goods and services. This theory was later developed by the English economist John Maynard Keynes in the early 20th century. Keynes argued that the amount of money in circulation was only one of many factors that could affect the price level of goods and services. He argued that the amount of money in circulation was only one of many factors that could affect the price level of goods and services.
Comparison Table
| Quantity of Money | Price Level |
|---|---|
| Low | Low |
| High | High |
Summary
The quantity theory of money is an economic theory that states that the amount of money in circulation is directly proportional to the price level of goods and services in an economy. It was first proposed by the Scottish philosopher David Hume in the 18th century and later developed by the English economist John Maynard Keynes in the early 20th century. The theory suggests that if the amount of money in circulation increases, then the price level of goods and services will also increase. For more information on the quantity theory of money, please visit the websites of the Federal Reserve Bank of St. Louis, the Bank of England, and the International Monetary Fund.
See Also
- Inflation
- Monetary Policy
- Money Supply
- Interest Rates
- Exchange Rates
- GDP
- Fiscal Policy
- Demand for Money
- Velocity of Money
- Money Multiplier
