Contrast the Cambridge and Fisher versions of the quantity theory. Explain why the Cambridge version of the quantity theory represents a more modern monetary theory when compared to Fisher's version
What will be an ideal response?
In the Fischer version, money circulated at a fixed rate (velocity) which was completely exogenous and not related to the demand for money. The Cambridge focus was on the quantity theory as a theory of the demand for money. The proportional relationship between the quantity of money and the price level resulted from the fact that the proportion of nominal income people wished to hold in the form of money (k) was constant and the level of real output was fixed by supply conditions.
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The table above shows the supply of loanable funds and the demand for loanable funds schedules
a. What is the equilibrium real interest rate and the equilibrium quantity of loanable funds? b. If the real interest rate is 4 percent, is there a shortage or surplus? What will happen in the market?
One reason for the extraordinary growth of foreign financial markets is
A) decreased trade. B) increases in the pool of savings in foreign countries. C) the recent introduction of the foreign bond. D) slower technological innovation in foreign markets.