Compare and contrast the classical and the Cambridge versions of the quantity theory of money.

Expert Solution

SIMILARITIES BETWEEN CLASSICAL AND THE CAMBRIDGE VERSION OF THE QUANTITY THEORY OF MONEY

CLASSICAL	CAMBRIDGE
DIRECT PORPOTIONAL RELATION BETWEEN QUANTITY OF MONEY AND THE PRICE LEVEL	DIRECT PROPORTIONAL RELATION BETWEEN QUANTITY OF MONEY AND THE PRICE LEVEL
INVERSE RELATION BETWEEN VALUE OF MONEY AND THE QUANTITY OF MONEY	INVERSE RELATION BETWEEN VALUE OF MONEY AND THE QUANTITY OF MONEY
M DENOTES MONEY	M DENOTES MONEY(ROBERTSON AND PIGOU)
ALMOST SIMILAR EQUATIONS	ALMOST SIMILAR EQUATIONS

CONTRAST BETWEEN CLASSICAL AND CAMBRIDGE APPROACH

CLASSICAL	CAMBRIDGE
MEDIUM OF EXCHANGE FUNCTION OF MONEY	STORE OF VALUE FUNCTION OF MONEY
P DENOTES AVERAGE PRICE LEVEL	P DENOTES PRICE OF FINAL GOODS OR CONSUMER GOODS
SUPPLY SIDE APPROACH	BOTH DEMAND AND SUPPLY SIDE APPROACH
T DENOTES TOTAL GOODS AND SERVICES EXCHANGED FOR MONEY	T DENOTES CONSUMER OR FINAL GOODS EXCHANGED FOR MONEY

Rahul Sunny answered 2 years ago

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