In monetary theory, money supply equals ratio, between money holdings and total income, times total income {Cambridge equation}. In this theory, money-supply increase increases prices. However, this theory is false.
In monetary theory, money supply times money transaction velocity equals physical output times average price index {Fisher equation} {quantity equation} {exchange equation}, because total spending equals total price. In this theory, money-supply increase increases prices, because demand increases. However, this theory is false.
In monetary theory, economy output increases faster than purchasing power increases, causes high inventories, and then causes recession and unemployment {Social Credit movement}, so government needs to add purchasing power early in cycle, to balance output and demand.
6-Economics-Macroeconomics-Theories
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Date Modified: 2022.0225