Share This Article:

Economic Definition of quantity theory of money. Defined.

Offline Version: PDF

Term quantity theory of money Definition: A theory that states a given percentage change in the money supply leads to an equal percentage change in nominal gross domestic product. This theory is derived from the equation of exchange and is a cornerstone of the monetarists view of macroeconomics. A key assumption in translating the equation of exchange to the quantity theory of money is that the velocity of money is constant (or unaffected by the other key variables--output, price level, and money supply).


« quantity supplied | quarter »


Alphabetical Reference to Over 2,000 Economic Terms