[EMAIL PROTECTED] wrote:
Hi Victor:
The quantity theory of money is not meant
to be held constant because the equation is made up of variables.
What the equation shows is how these variables affect each other. That
is why they are using letters (or symbols) instead of actual numbers. It's
used to identify a relationship. What I was trying to demonstrate is that
any attempt to cause a decrease in the overall price level could lead to
spiralling deflation.
The logic for this is simple. Why should
I buy something today when I know it's going to be cheaper next week. This
means that decreasing prices will cause decreasing velocity, or in other
words V(P), and this could cause a decrease in output.
For the same reason you buy something today with a charge card at 18% interest.
Because you want it now, not next week.
--
-- jbod
Tax Privilege, Not People
___________________________________________________
Come visit and see a new economic perspective --
http://www.geocities.com/CapitolHill/1067
Comments/arguments welcome.
.
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