Unformatted text preview: ey supply and economic activity directly related.
Key variable is the velocity of exchange: MV = PQ.
4. As households hold more money, velocity decreases.
Variables affecting the amount of money held; frequency of
receipts, Increases in Money supply leads to an increase in output.
Monetarists favor steady gradual increases in money
supply Dr. David P. Echevarria All Rights Reserved 3 MONETARY THEORY
C. Theory of Rational Expectations
1. 2. Households...
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