This approach of the quantity theory of money specified a proportionality theory. The general price level ought to vary proportionally with the variations of the money supply. For instance, if there is an increase in 10 percent quantity of money there is an increase of equivalent 10 percent in rising general price. The relationship between money supply prevailing rate and the real income happens only when the velocity of funds remains stable. Consequently, velocity lies at the center of the link. When we consider the …show more content…
The description offered by Frank Shostak and Milton differ from Keynesian’s theory. However, the argument fits into the current economic times. Theories describing theoretical arguments on inflation depict the certain level of truth in the current world. At this time, professionals need to establish the correct understanding of the connection between money supply and inflation. If the government restricts money supply, then increase will result as a problem in the market. Considering the discussion, if you target the rate of growth of money supply and rate of inflation, then unemployment can be