onset cota, et ‘ibe camnnd for money eee eas tae, ee etal Ske et aco thee Eaters a ee es ye oe are ha at sy Sees ny oe 23.16, Lguy Apron Mane cee piecstte apie gery Ee naoa ena aos ee Soe a toey ct ay ceo ec eee ce Deen nae Seve sent lee Sears pace screeners SER oes mode as as Sr a eo io parce sore to sete Teste eh tebe wee eal Sela oem swith ue rk spores las taro eccrine ey ve te eed Seen) le, Soar cal ape ae te eee tose ont Teer Wd eer reat SLOAN tcc ret SS eee ee Se ha be dam ote Se eee na oe iene Sea ene ae e teres ie htones i Heactentrar tae ee eee Sse Tan east cate es Siete se SE a TR ere Toa TE"Mn CO at Fee er pot tecnica Eee Sar iy te itn oatce of hia approach <_tepmenin ti au ier roe us Soe ao emer uportal ety rss Froan Snes iri refi SLi tone ie ek sic ee cana nO eee LN imac 2S ear irony aspen : ime fom icp ont otoeney sidistman's approsch tas, rowers, been (cised on the Sollowiag gu eee toate fein of mony: Pinay," Soom ts Pay led sl apt on! HRs men vin Spe Sieg inpatient may cramer hs ul Screg ne terrae the jtrest-castcy ofthe demand fr mongy't satan eee pote Sgt TM sete capt mem ine indecrsef eta eo, tren mane demand cio eon end rt of tere his len isco werk Tx cin tbe aear my {eld went empl spn te relwany. crete gee same ogc tees 1 heel expan san ne 2s 2 are ath od dec wae Biren ie Mt ben erisi smdra eta oes a Spec anc a x docmina oe seat ce acer ee {ct fer mony Une Fc nian nde pate rl Res Betas ned Scene tet meg ms ness Sg eel fi and te demad for money, Sage patie’ tse ea ese dn ess rch wl uy tery te yt berm ee ima FE EH taper Mn ning Ran 99, gin esaThe dena fr money etion ns fr opr end ore brbeen fie Sen kg ol my vev(Brang $B iv) sd i a tn qouiy bey fom: se Visine wey SER Oa oy ach erate eal acne icy ck The onc con ‘Sapna a V ele nd wheter cargesin cme and poke evel Tibequen ponte chara m=) PP aun lednan, asia her coos a ge sect ad proper ‘Suhenbrcen fad owee eon se TAPIA stent donates the lesa a aeaynn, Thema ites Bae ‘eta sponses oe mse (Money does mater: tn casa ts, soy as ered ony sa vel a oa pete tammy dnl nt lon oan eho arch sian er ecm ety and many oes ai (a) Demand for mony teary: While Fishers uml roy ae eel 2 booty of pce ECT yao sonny, Frida qty ory [etal ier ofthe ean fr >. (Sibi of money demand function: Te tits td te sexe on he say of Stoney Gem fintan. Sten rida, 1 ‘Ean much ree on te silty of EEE ‘mand oslo (0) acome-clatoty of menay demand _Acutngt he case apoac, neonelaty ‘tthe cepand or money uty. Pregnan cn he rps lds fat income east of enane fx ‘enya mercy of mney demand Te cafe acy ti ee ath Sra ca aa, Mit Fle, ik Oe is mostly HOEY ‘Geng pamave tur sq rela fe), No acuraty of nme: ecb he cid Spweacs, oney rel bot MAR Siete Bt mt mene moron a) Money rte: Ps union i eee rowey rie ed 0 ha med epee monty ee er or aerating fh, the BOs of a Ay stall be macho wh the CHD Teme Pinang ree sn 14 Differences betweee Friedman and Keynes! Appronces ‘rw appronches_made by Frtdnan ad Keg ney dearer om esha (W) Emphasis on weal or incoone a Keomes ony demand shay the win em pon ‘ime Income, sas Fiat enphasics Sac ttt fom and nereran, 2 Se hermano maa for moe) {uy Subliiy of mency demand fancton et regaed mane Gemabd fection a Note necuse. of te Sopendence upon ontnous changing expectsns Freon, on i cele ey dma en i) Nesegmention of money demand: Kesoes mite» dotucion between be active and Ie TRhtcerbu ere ms such seperti of D6) (and in oedmans her. ti). Rates of return: Keyes conceited amon bo ce ba Fcaman cosieed ‘ei sof ei on bao, able [Goals the chnges inner rts of rr Fay lead shit frm mony to Dona esis. oF (ir duraie mv, Keynes ld tale sacha Side station among ase 2, Evaluation of Fredma’s efor A siren ear of Pda appre tat irae no astnction between te active aliases and isle balances oF between the ‘rescore and speculative balances. Te differenPah ake ni cur 6 W pel eee Ne es Se ee eee tana eran Sacte ae ioe Geren ct feaeebe cn asa eee oo tn open fens hl tee See eee ce Tovey cay oe cs er ilps elie erie ea eee Nib combing oli yi amd sen lca te a ras ai eS a Rae te y.¥,,| 0 Beg witin the total demand for money, P {or the general price level, r, forthe market bond eres fae, re fr the mavket rae of intrest on res sini carpe Jet of pl sores gods, Wt er Peg esis ln ding. } index. Fer of imerest~twor and fo specie ppeat tic, andthe tid, © apy toa ea {set This general i, 1, ean be unger) oe the weighed average et 75 applicable to physical goots and man wea The later two cannot be observed gaat They, therefore, cam best be regarden yaoing in some sjstemati way wih fay On this" astimption” aye "Fiednan stop rasan sitonl capi vr ct vate eg infucce a ily taken to aecount by te eae otryand 7" a MACRO ECONOME ANALG of nerest unchanged conan te nde fd pl theme, 75 Freda, ye gt ‘This te demad futon canbe expresed 1 4 Assamiog tha rand 7 sr tbl oer ie nd thot the rate of "change in pes ie esied Separately in any event. Friedman dente the nominal rere on bonds and guts sly and re. The demand funtion for many wl ot become at Pins wt weed(tonich wera) Po sits hi di tn al dae tate nee a Sr aly acts ets em tes ot eee negates ‘csr way” oF the nominal unis ses mee ‘ny ee ee i ft ‘En ioe i cea Gane rane ha Stan tg ape tn nmr tcl gene qe Oem enolase se Poh he nd ton © ae aatees (stone a 1 a sw ;avsu) so ee Let X= fThe equation (i) can be writen so en‘ito fame {0 Moasy (MD: (i) Boods (0) a Baiien (8): () Pic oo-himan goods {Gh sand (9 Maran cpt) (Aton (40 = Money may yield a return in the rm tne, fr stance,mereston demand ‘pou, limp) mers Bower wei ‘eee fos gemeall supose that money Deis yeu sat i Klin te usual form of Moeninnce, secur ec The size of is rear in ‘Rafters per moms! wi oF ey depends ley ‘Sth vbr of goats tha the un sareponds fo, ‘ron th pena rice level whi eye designated BPA tw inthe geoeral eel of prices involves ‘Serectaton in money and repersents capital oss invrel terms which gust be deducted from the trata eld On te oneal in general ‘re level cates appreciation in money and tbe ‘Epa glo revi shoud be incided in the rami yield ot 005) Ta), Bonds (Bs a saan bode aken tobe aim to's pert ncoe seam of constant ‘oma! ye hen the retro Bod Bode can ‘Shame ve ieee Grae (a) the anna tl ‘Seount he ecetes the coupon and) the change iSite band price over te eto which may of ‘ours be neatve psn he pice Is expected {© remain constant then bons wort 1.00 rupee Jes ra per year here ssl the coupon su Uiided by the markt price of Bond. SoU wil be the pre Of 8 hand hich is expected 16 pay 1.00 pes et year I pice expected to cage, he ‘eld must take account of he fer the fora of ‘pected appreciation cr depen ofthe Bo. {be are! ese of interest on os the nora po atu canbe pint - (4) sense rien (8) ER) rremsisite rate of expt appreciation of deca owing 10 Peete tenis 5-2 tegstr with P, are iret defies te ral etchant aS ‘of bonds.” (di) Bie (&) +A standard it of eg according Yo Mion Feed, nity be reste 98 ‘lan income strat festa ea” amount, The Homa return to the equity Hobe may assure three fri; (2) the eons nominal Sy change mF (0) be nine oe sihersion from ths emia! mount to rin fo camge Pind (my cee be nomen poe oie ine es is. This um sagen i P which ['skeady isredeced detec to al cen Sem Feling 100 rye sf ean mt Soe of ie (t) Physical new-tamen goods (G) = The pagal sce aan gous eld he wea wine (is arc simi egies with te rence that tromey. Tos ret, We that autos depends hese vn he rgaraed as yeng 3 semi arn nike foe of cepecoatie sapere em ales Tribe sonoepece ce P, neta ees Applies equal 10 Be ys! goods the rei fae of return foot Sem ca De spread 8s 1. Tye expression represents the site ‘Fat era per 1.09 rape othe psa go iether mah fy coo Be soe ung 100 pee a Be om NS toman a5 (0) Ramen Capa): be man ans tren Smee Sok 8 i WNGonn capt evo otto har rete ers cata cee ee Sei deed tema fare pee No SDN ee eepenttieet utes me tena hr boson cape an anacots eeh feltnes oboe, be ran sees fendered am Re Sets SAR RI, Tah si Rete Han aoe a eri ae pce ay rea BN Mee ‘al cisinvestvne Oh abe Rann age RUA respect ini fom st capa ne Figo Feats has ate te sae ono ot ea anne fe he ANE Camm expan Be st wae EER fae crt An teats ek PAO Roveve cane divide ere nS hahah a ARYA Nas330 ‘absence of money illusion which means the people hold money for wat wil bring. On the basi of| i the classieal proposion can be msnained that & doubling of the quatty "of money wil lead 1 a oubling of prices without any change In real ‘uiltrum, Giff Loyd kas, however, pointed out that the price stability can be stained without ‘ssauming tht there is @ definite gunatity of money ‘hich people want to hold. No doubt, he fact tht eople want hold money and tat the available ‘uantty of money is xed wil acu price sbiiy, yet s not consistent withthe classes! neal) ‘of money 25.12. Milton Friedman's Restatement of Quantity Theory The quantity theory of moncy which specified a ‘roportoeats relationship between money znd pies fell into disrepute aier the Great Depression of 1930. I as oly in the ater 1980s that the theory underwent a revival and re-emerged into professions respectability principally Because of the works of eo-quany theorists led by Mion Friedman, In the book, Studies inthe Quantiy Theory of Money published in 1956, Friedman concbuted an article, The Quantiy Theory of Money-A Resatement which Heralded the reamergence of the quantity theory, Apart fiom him, a galaxy of economists ing Henry Simons, Lloyd Mints, Frank Knight and Jacob Viner developed very able and Felevant version ofthe quantity theory i which ‘was connected and Integrated with general price theory and became a flexible and sensitive too! for interpreting movements. in aggregate economic activity and for developing relevant policy preserpions,"2” Friedman points out that the approach of Chicago economists isa theoretical one. The essence fit Hes i its insistence that money does mater And that any interpretation of short term movements ‘neconomic activity is seriously a fault and soften misleading, if i overlooks monetary changes and its repareussions and if fist explain why people are willing to hold a particular nomial quantiy of ‘money in existence. Friedman asserts thatthe quantity theory, in [MACRO-ECONOMIC ANALYSi¢ hfe. sani hy of te donned fir mone. Its nthr hoon oF pe, nore nc TSeome, oro price level The demend for money te rom te ulinatswesl-ewning nis tks ‘conomy. Forthem mene) i one Kinde sane thy of holding woah andi is Heneal wi ip anend fra snsuption sie, Alike the hay fcansumer oie, th demand fr Boney Sepa, pen the foowing Seto ators (Theta wehbe hel in ie emg (ip The pice ofand rerum on oe foro ey snd ts aterm forms. (i The tates and preferences ofthe wet owning nits. Whea money demand Is considered analogous to the demand fora durable consumer good thought ht balding of money yield uly foe Consumers Is supposed hat marginal ily of Inoney dcins wih he quanty of may belnces hel emay De deced hat the wtity maining ‘conor i il ol that any of money wick quts the marin! wily of money lanes the marginal willy forgone by not holdag sore alternative asset.” Money isalso demanded by the productive covers, Frthem moneys acapil goo a sores ot productive services thal are combined ihr Drodetve services fo yield the products tha the eerie sell Ths Friedman conirs ta hry {demand jor money a aspect port ofc theory of Septal. The oldng of more blac reve t Sing on tr as they provide onvenienee an ligidty: Money balances aes tte an inp a rer it the pres by whieh 000s and ersices ae produced nother word, ‘mone balances eld by Fis ar anlogous to Ths ‘working capil. The opti amount ef money to fold nthe qunty foe which marginal saving in trarsacton eos equals he expoctd rate of rum forgone by not oiing some aenalive asset Friedman analysed that wealth canbe held in numerous fos ard each frm of olin Wakes auite a diference to the composition of Income Sean. Out of these numerous forms io which wealth canbe held, Friedman considers te ve ‘TW nan The Onmey eon of Money. A Ronen eb Reads Ta Macros TT ‘8 Mul ( 2H. R Levcie: Mecrovcoomie (1979, F165, 29, TR Saving Traction Cast andthe Demand for Money, AER ate 171),22:44 4 ex UR er me: OQ @ slideshare.net/NayanVaghe () aScribd company = \ | Restatement of QD & quantity theory of money “A Nayan Vaghela Oct. 28, 2015 + 28 likes » 18,075 views Limitations of the Theory: 1. snot easier inctude the me depots in he course of Maney 08 on tnhekowele such depos the deguilr hove to lose nites o mey hove 0 oy ome panoties herloe thee Kindo teh shoud be Nesied or Hear money, 2. Hedman not azo neglected the tect of leo ieret onthe demand for money ‘he oer approaches has done. 12 supply it independent the changet inthe price 4 me hegmon's ears con nt be sa Hettement Re st peserie he poner opprocehinhs cw woe / & merato ot non human wean fo human weath nd the other factor hen Income {wondujaresubjecieinnatue (cont be meonnes) (eo) < Tof? > ua (¢ Education § scriBp + &% slideshare Millions of books, documents and more, ad-free.@»x “ level of permanent income same saving and consumption differ. Thirdly, the usage of terms like ‘permanent, ‘transitory’ and ‘measured’ have tended to affect the clarity of the theory. The concept of measured income creates confusion by mixing with permanent and transitory income on the one hand and permanent and transitory consumption on the other. Fourthly, the distinction between human and non-human wealth is sadly missing in Friedman’s theory. In-spite of all these weaknesses it can be fairly concluded with the words of Micheal Evans “that the evidence supports this theory”, and that Friedman’s formulation has reshaped and redirected much of the research on the consumption function.