Question

identify the similarities between the transaction and cash balance approaches to quantity theory of money

Answer 1

Similarities between the transaction and cash balance approaches to quantity theory of money is that;

. Both have the same conclusion Fisherman and Cambridge adaptations conclude that there there is a proportional association in the volume of money, price level and value of money.

-  Both tend to have similar equations Fisher’s equation P = MV / T is alike to Robertson’s equation P = M / kT.

Answer 2

The models are compared with the help of its equation.

In the Fisher model, P = MV/T

In the Roberson model. P = M/KT

This is the main difference between the transactions and cash balances in the model. V and K work in the opposite direction to each other that changes the whole ratio of the equation. Apart from this, the transaction shows the round approach whereas cash balance shows a straight approach.