Milton Friedman

July 2018, Paper-II
Question no: 14
According to Milton Friedman, Quantity Theory of Money is the theory of
a) Value of Money
b) Price determination
c) Nominal income
d) Demand for money
Answer D
According to the Quantity theory of money by the classical economists, the theory seeks to explain the factors that determine the general price level in a country. The theory states that the price level is directly determined by the supply of money. In his reformulation of the quantity theory, Friedman asserts that “the quantity theory is in the first instance a theory of the demand for money. It is not a theory of output, or of money income, or of the price level.”