Classical Monetary Theory ? The Traditional Quantity Theory Essay, Research Paper

1.

The

Transactions Approach: Fischer

equation: MV = PT, where:?

M = Money stock; V = velocity of circulation (average no of times each monetary unit is

utilised in a given accounting period); P = general P level; T

= total no of transactions. If V & T assumed constant in

ST, then: MV = PT? -

therefore ΔM → ΔP Here, increase in Money stock initiates price

rises, and the transactions demand for money then responds passively to this

Price increase.? Ceteris Paribus, MD

unit elastic.? 2.? The

Cambridge Cash Balance Approach: (Doesn?t seem esp. imp)