Question

Explain Quantity Theory Of Money

Answer 1

Answer:

quantly theory of money is a macroeconomic theory and practice that describes the practical uses of fiat currency in a public monopoly from the issuing authority, normally the government's central bank. Effects on employment are used as evidence that a currency monopolist is overly restricting the supply of the financial assets needed to pay taxes and satisfy savings desires. MMT is an evolution of chartalism and is sometimes referred to as neo-chartalism. Its macroeconomic policy prescriptions have been described as being a version of Abba Lerner's theory of functional finance.

Explanation:

Answer 2

In Economics,the quantity theory of money basically implies the relationship between the level of money supply in the economy and the overall price level of goods and services that are sold within any economy.

Explanation:

• The quantity theory of money states that the level of money supply in any economy is directly or positive related to the overall price level of goods and services sold in the economy.
• Quantity theory of money advocates that as the money supply in any economy increases by the central bank,the price level of the goods and services sold in the economy also increases proportionately and vise versa.
• Hence,quantity theory of money importantly leads to the concept of inflation which refers to an increase in the overall price level of goods and services in the economy.Therefore,based on quantity theory of money,increase in money supply can ideally lead to inflationary effects in the economy.
• As the money supply increases,the real value of the money or currency decreases or in other words,increase in money supply reduces the actual purchasing power or capacity of money pr currency.Hence,due to an increase in money supply,one unit of money or currency would be able to purchase or fetch less amount of any product or services compared to before to prior to money supply.Hence,the market value of goods and services also increases as money supply increases in the economy.