The Quantity Theory of Money and Aggregat Demand (Miller, p:452)

1. Classical Theory of demand for money

Faktor penentu penting dari price level dalam sebuah perekonomian adalah:

The Quantity of Money Circulation

sehingga:

Kunci utama untuk mengetahui/memahami (perilaku) price level adalah dengan memahami:

”How much money all households

desired to hold?”

Analysis price level determination

 

Theory demand for money

 

Quantity theory demand for money

Quantity Theory Demand for Money

      Irving Fisher                              Alfred Marshall

 

Equation of Exchange                 Cambridge Equation

       MV = Py                                M^d = k Py

 

                                              The Classical Aggregat

                                                           Demand Schedule

                                                                Yd = M₀/kP    

Appendix:

 1. Aggregat Demand Schedule:

Cambridge equation: M^d = kPy ………(1)

Nominal money supply lewat kebijakan bank sentral adalah : M^s = M_o

Dalam kondisi Equilibrium;  Ms = Md, maka persamaan (1) menjadi :  M_o = kPy  à  y^d = M₀/kP

2. Price Level Determination:

In the classical model, output is supply-determined, and so:  y^s = y^o, full employment output level

Dalam kondisi equilibrium: y^s = y^d, maka:

y_o = Mo/(kP) à P = Mo/(kyo)

3. Velocity in the Classical Model

Cambridge:

M = kPy à M/k = Py …………. (a)

Fisher:               MV = Py …………. (b)

Substitusi a&b, sehingga:

M/k =MV  à  v = 1/k