The Optimum Quantity of Money
The Optimum Quantity of Money
This chapter takes the strategy of constructing economic environments where the presence of fiat money is essential and the societal benefits of monetary exchange are clearly laid out. Through this strategy, new insights for monetary policy are sought. Aside from considering a one-time change in money supply, the chapter also assumes that monetary policy takes the form of a constant money growth rate. The characteristics of the Freidman rule are addressed, and the model itself is evaluated for its feasibility and optimality. The chapter aims to examine Friedman’s doctrine of “optimum quantity of money” and determine if a deviation from the Friedman rule may in actuality be optimal.
Keywords: constructing economic environments, monetary exchange, fiat money, monetary policy, money growth rate, Friedman rule, Milton Friedman, monetary theory, optimum quantity of money
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