Question

1) Irving Fisher (1867-1947)

         a.      was a Yale mathematician-turned-economist.

         b.      pointed out that unanticipated inflation may cause the real interest rate to rise.

         c.       developed the so-called “Cambridge equation”: M = kPT.

         d.      all of the above.

2) Irving Fisher

         a.      believed that the amount of money in circulation affected aggregate price levels.

         b.      believed that business fluctuations cause price fluctuations.

         c.       correctly foresaw “The Stock Market Crash” of October 1929.

Answer 1

1

Irving Fisher (1867-1947)

*was a Yale mathematician-turned-economist.

Irving Fisher was a Mathematician turned economist. Irving Fisher introduced quantity theory of money that shows the relationship between money supply and price level in an economy.

According to Irving Fisher,Unanticipated inflation cause nominal interest to rise.

2) Irving Fisher

* believed that the amount of money in circulation affected aggregate price levels.

Irving Fisher in his Quantity Theory of money explains the positive relationship between money supply and price level. As money supply increase, price level also increases and value of money decreases. Thus rise money supply can leads to inflation in an economy. The quantity theory of money was established through the equation(MV=PT).