chapter  5
30 Pages

Keynesian Economics and the Quantity Theory

Introduction and Summary KEYNESIAN ECONOMICS criticizes the quantity theory of money

on two distinct grounds. First, it argues that the velocity of circulation is not a constant of economic behavior, and so questions the usefulness of the quantity theory as a device of applied economic analysis. Second, it insists that the theory is valid only under highly restrictive assumptions, and so questions even its theoretical usefulness.