Critically examine the quantity theory of money. give examples
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In monetary economics, the quantity theory of money (QTM) states that the general price level of goods and services is directly proportional to the amount of money in circulation, or money supply.
The quantity theory of money (sometimes called QTM) says that prices rise when there is more money in an economy and they fall when there is less money in an economy. The following formula expresses the theory:
M x V = P x T
Where M = the money supply
V = the velocity of money
P = average prices
T = number of transactions in the economy
Economist Henry Thornton is credited with developing the theory in 1802 after noticing that the more gold and silver Europe imported in the 16th century, the more things cost.
The quantity theory of money (sometimes called QTM) says that prices rise when there is more money in an economy and they fall when there is less money in an economy. The following formula expresses the theory:
M x V = P x T
Where M = the money supply
V = the velocity of money
P = average prices
T = number of transactions in the economy
Economist Henry Thornton is credited with developing the theory in 1802 after noticing that the more gold and silver Europe imported in the 16th century, the more things cost.
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