Correlation Between General Price Level And Money Supply, By Milton Friedman
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 equation, the growth of income result in growth in the price level and real national income. The results rely on the condition of the economy. The effect of a certain change in the quantity of money on the price