money, quantity theory of

Economic theory relating changes in the price level to changes in the quantity of money.

It has often been used to analyze the factors underlying inflation and deflation. The quantity theory was developed in the 17th and 18th centuries by philosophers such as John Locke and David Hume and was intended as a weapon against mercantilism. Drawing a distinction between money and wealth, advocates of the quantity theory argued that if the accumulation of money by a nation merely raised prices, the mercantilist emphasis on a favourable balance of trade would only increase the supply of money without increasing wealth. The theory contributed to the ascendancy of free trade over protectionism. In the 19th–20th centuries it played a part in the analysis of business cycles and in the theory of rates of foreign exchange.

* * *


Universalium. 2010.

Look at other dictionaries:

  • Quantity theory of money — In economics, the quantity theory of money is a theory emphasizing the positive relationship of overall prices or the nominal value of expenditures to the quantity of money. Origins and development of the quantity theory The quantity theory… …   Wikipedia

  • quantity theory of money —       economic (economics) theory relating changes in the price levels to changes in the quantity of money. In its developed form, it constitutes an analysis of the factors underlying inflation and deflation. As developed by the English… …   Universalium

  • Quantity Theory Of Money — An economic theory which proposes a positive relationship between changes in the money supply and the long term price of goods. It states that increasing the amount of money in the economy will eventually lead to an equal percentage rise in the… …   Investment dictionary

  • quantity theory — noun or quantity theory of money : a theory in economics: changes in the price level and the value of money vary with changes in the amount of money in circulation …   Useful english dictionary

  • quantity theory of money — noun see quantity theory …   Useful english dictionary

  • quantity theory of money — noun the theory that changes in prices and the value of money vary with changes in the amount of money in circulation …   Wiktionary

  • quantity theory — noun Date: 1888 a theory in economics: changes in the price level tend to vary directly with the amount of money in circulation and the rate of its circulation …   New Collegiate Dictionary

  • money — moneyless, adj. /mun ee/, n., pl. moneys, monies, adj. n. 1. any circulating medium of exchange, including coins, paper money, and demand deposits. 2. See paper money. 3. gold, silver, or other metal in pieces of convenient form stamped by public …   Universalium

  • theory — /thee euh ree, thear ee/, n., pl. theories. 1. a coherent group of general propositions used as principles of explanation for a class of phenomena: Einstein s theory of relativity. 2. a proposed explanation whose status is still conjectural, in… …   Universalium

  • Money supply — Finance Financial markets Bond market …   Wikipedia

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.