Money theories are nothing but a part of economic doctrine, in which the monetary impact on the development of the economy is studied in detail. It examines the money that somehow, but has an impact , both on the level of prices and on the quality of productivity of enterprises.
Basic Theories of Money
It should be noted that modern Western economists, analyzing the development of the directions of monetary theory, distinguish such theories of money as:
- metal;
- quantitative;
- Keynesian;
- functional.
Thus, according to the metallic theory that arose in the 17th century. based on the worldview of mercantilists, wealth is identified with money. At the same time, the latter is equated with precious metal. Proceeding from this, the wealth of each nation should be considered the amount of silver, gold fossils in the bowels of its land. Replenish the deposits of such wealth through foreign trade. At the same mercantilists saw no point in paper money.
A quantitative theory arose a century earlier than the previous one. Such a theory was formed as a result of an unexpected sharp increase in the prices of goods caused by the increase in Europe of silver and gold reserves. Thus, the main theses of the theory include the thesis - "metal money is deprived of value."
As soon as the amount of money increases, their cost is significantly reduced.
The level of prices for goods depends only on the amount of money in circulation.
This classical quantitative theory of money laid the foundation for an analysis of the principles of the emergence of monetary value. Thanks to the ideas embedded in it, classical and neoclassical trends were born in the economy.
Keynesian theory assumes a market economy for a system with unstable characteristics, and
The creator of this theory, the Englishman JM Keynes, believed that it was gold that interferes with the reasonable regulation of the sphere of money. For him, cash is a kind of bond that occurs when a bank invests in a firm that previously acquired some kind of capital ownership.
According to the functional theory of money, the latter is only a means of conversion. Their functionality can only be confirmed in this area.