0
1
0
2
0
3
Similarties
Robertson's equation
P=M/KT issimilar to
Fisher's P=MV/T. The
difference lies in V
and K, which is
actually reciprocal to
each other.
Both the approaches
lead to same
conclusion. i.e., price
level or value of
money depends upon
the money supply.
MV+M'V' of Fisher's
equation, M of Robertson's
and Pigou's equation and
n of Keynes' equation all
refer the same.i.e., the
total supply of Money
4.
Fisher Robertson
MV =PT M = KPT
V = PT/M K = M/PT
Thus, V = 1/K K = 1/V
V refers to the rate of spending K refers to the extent of holding
and not spending
⮚ It means when people want to hold more money (higher than K), they want to spend less or the velocity of circulation of money will
be less (lower the V). Thus, by substituting 1/V for K and 1/K for V, the two equations can be reconciled.
⮚ The Fisherian approach emphasises money as a stock while the Cambridge approach stresses money as a flow.
5.
Dissimilarties
✔ Relative Stressof Supply and Demand for
Money.
✔ Definition of Money
✔ Flow and Stock Concepts
✔ Transaction and Income velocities
✔ Nature of P
✔ Factors affecting V and K
✔ Relationship between M and P
✔ Different approaches to Monetary Theory
6.
Superiority of CashBalance Approach
Realistic Theory
01
Complete Theory
02
Broader Theory
03
More Useful
04
7.
Superiority of CashBalance Approach
Explanation of
Cyclical Fluctuations
0
5
Basis of Liquidity
Preference Theory
0
6
Casual Process
0
7
Nature of Variables
0
8
8.
Criticism of Cash-Balance Approach
• Simple Truism
• Unitary Elastic Demand
• Speculative Motive Ignored
• Investment goods ignored
• Role of Rate of Interest ignored
• Real factors ignored
• Real Balance effect ignored
• Narrow view of K
• Two-way relationship between k and P
• K and T assumed constant
• No explanation of trade cycles
• Lacks quantitative analysis
