1. The Quantity Theory of Money
MV = PY
Lectures in Macroeconomics- Charles W. Upton

2. The Quantity Theory of Money
The Scenario
The Money supply is doubled on Christmas Eve.
The auctioneer has the job of putting the money market and the goods market back in equilibrium
The Quantity Theory of Money

3. The Quantity Theory of Money
The Scenario
The Money supply is doubled on Christmas Eve.
The auctioneer has the job of putting the money market and the goods market back in equilibrium
Money Supply = Money Demand
Y = C + I + G + (X-M)
The Quantity Theory of Money

4. The Quantity Theory of Money
The Y and M Curves M P Po Y r ro
The Quantity Theory of Money

5. The Quantity Theory of Money
The Y and M Curves M
Y Curve: The combinations of P and r that keep YS = YD. P Po Y
Y = C + I + G + (X-M) r ro
The Quantity Theory of Money

6. The Quantity Theory of Money
The Y and M Curves M P
Y Curve: The combinations of P and r that keep YS = YD. Po Y r ro
The Quantity Theory of Money

7. The Quantity Theory of Money
The Y and M Curves M P
M Curve: The combinations of P and r that keep Money Demand = Money Supply Po Y r ro
The Quantity Theory of Money

8. The Quantity Theory of Money
The Solution M’ M P
2Po Y’ Po Y r ro
The Quantity Theory of Money

9. The Quantity Theory of Money
The Solution M’ M P
Doubling price level keeps money supply constant and wealth constant. Hence no real effect.
2Po Y’ Po Y r ro
The Quantity Theory of Money

10. The Quantity Theory of Money
The Solution M’ M P
Doubling price level keeps money supply constant and wealth constant. Hence no real effect.
2Po
Subsequent lectures will take us through the mechanics, but first a discussion of the Quantity Theory and the Quantity Equation Y’ Po Y r ro
The Quantity Theory of Money

11. The Quantity Theory of Money
The Quantity Equation
The Quantity Theory of Money

12. The Quantity Theory of Money
Velocity
Speed with which money turns over.
The Quantity Theory of Money

13. The Quantity Theory of Money
Velocity
Speed with which money turns over.
Irving Fisher
The Quantity Theory of Money

14. The Quantity Theory of Money
A Little Manipulation
The Quantity Theory of Money

15. The Quantity Theory of Money
A Little Manipulation
The Quantity Theory of Money

16. The Quantity Theory of Money
A Little Manipulation
The Quantity Theory of Money

17. The Quantity Theory of Money
The Quantity Equation
The Quantity Theory of Money

18. From the Quantity Equation to the Quantity Theory
The Quantity Equation is a tautology
The Quantity Theory of Money

19. From the Quantity Equation to the Quantity Theory
The Quantity Equation is a tautology
But what about V? Here, we get to the Quantity Theory
The Quantity Theory of Money

20. From the Quantity Equation to the Quantity Theory
The Quantity Equation is a tautology
But what about V? Here, we get to the Quantity Theory
The Quantity Theory of Money

21. From the Quantity Equation to the Quantity Theory
The Quantity Theory of Money

22. The Quantity Theory of Money
Are We Done Yet?
The Quantity Theory of Money

23. The Quantity Theory of Money
Are We Done Yet?
Evidence
Qualifications
Manipulation
Application
The Quantity Theory of Money

24. The Quantity Theory of Money
End
©2003 Charles W. Upton. All rights reserved
The Quantity Theory of Money