Question

Quantity theory of money

Answer 1

The concept of the quantity theory of money (QTM) began in the 16th century. As gold and silver inflows from the Americas into Europe were being minted into coins, there was a resulting rise in inflation. This led economist Henry Thornton in 1802 to assume that more money equals more inflation and that an increase in money supply does not necessarily mean an increase in economic output. Here we look at the assumptions and calculations underlying the QTM, as well as its relationship to monetarism and ways the theory has been challenged

Answer 2

Quantity theory of money states that money supply and price level in an economy are in direct proporation to each other .when there is a change in the supply of money there is a proporation change in price level and vice -versa