Milton Friedman Quantity Theory Of Money. In friedman s modern quantity theory of money the supply of money is independent of demand for money. The quantity theory of money takes for granted first that the real quantity rather than the nominal quantity of money is what ultimately matters to holders of money and second that in any given circumstances people wish to hold a fairly definite real quantity of money.
On the other hand the demand for money is stable. For example if the amount of money in an economy doubles qtm predicts that price levels will also double. In friedman s restatement of the quantity theory of money the supply of money is independent of the demand for money.
In friedman s restatement of the quantity theory of money the supply of money is independent of the demand for money.
The quantity theory of money takes for granted first that the real quantity rather than the nominal quantity of money is what ultimately matters to holders of money and second that in any given circumstances people wish to hold a fairly definite real quantity of money. In friedman s modern quantity theory of money the supply of money is independent of demand for money. In monetary economics the quantity theory of money states that the general price level of goods and services is directly proportional to the amount of money in circulation or money supply. Due to the actions of the monetary authorities the supply of money changes whereas the demand for money remains more or less stable.
