Chapter 19.docx - Chapter 19 Quantity Theory Inflation and the Demand for Money Quantity Theory of Money is not a formal theory with specific

# Chapter 19.docx - Chapter 19 Quantity Theory Inflation and...

• Notes
• 2

This preview shows page 1 - 2 out of 2 pages.

Chapter 19- Quantity Theory, Inflation, and the Demand for Money Quantity Theory of Money is not a formal theory with specific predictions, it is a framework for thinking about money and inflation with the “equation of exchange” as a starting point Equation of Exchange an identity which illustrates the fact that the total spending per time period is equal to the amount of money in circulation multiplied by the average number of times it is spend per time period (MxV = PxY) Determinants of Velocity Velocity is largely determined by the technology of payments Demand for Money we can think of the equation of exchange as an expression for the demand of money. Increasing use of credit increases V and decreases k Quantity Theory and the Price Level if we take V and Y as fixed at a point in time, larger M should show up as proportionally larger than P Quantity Theory in the Long Run level of prices is proportional to the money

• Winter '18
• houston

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern