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The classical economists took the theory of the determinants of the level and growth of population as part of Political Economy. Since then, the theory of population has been seen as part of Demography. In contrast to the Classical theory, the following determinants of the neoclassical theory value are seen as exogenous to neoclassical economics:
The quantity theory of money (often abbreviated QTM) is a hypothesis within monetary economics which states that the general price level of goods and services is directly proportional to the amount of money in circulation (i.e., the money supply), and that the causality runs from money to prices.
In the 20th century, Keynesian, monetarist and new classical (also known as rational expectations) views on inflation dominated post-World War II macroeconomics discussions, which were often heated intellectual debates, until some kind of synthesis of the various theories was reached by the end of the century.
Most classical theories, including Fisher's, held that velocity was stable and independent of economic activity. [17] Cambridge economists, such as John Maynard Keynes, began to challenge this assumption. They developed the Cambridge cash-balance theory, which looked at money demand and how it impacted the economy. The Cambridge theory did not ...
Wicksell's theory of the "cumulative process" of inflation remains the first decisive swing at the idea of money as a "veil". Wicksell's process has its roots in that of Henry Thornton. Recall that the start of the Quantity theory's mechanism is a helicopter drop of cash: an exogenous increase in the supply of money.
The Lucas islands model is an economic model of the link between money supply and price and output changes in a simplified economy using rational expectations.It delivered a new classical explanation of the Phillips curve relationship between unemployment and inflation.
The classical dichotomy is the assumption that there is a relatively clean distinction between overall increases or decreases in prices and underlying, “nominal” economic variables. Thus, if prices overall increase or decrease, it is assumed that this change can be decomposed as follows:
The classical dichotomy was integral to the thinking of some pre-Keynesian economists ("money as a veil") as a long-run proposition and is found today in new classical theories of macroeconomics. In new classical macroeconomics there is a short-run Phillips curve which can shift vertically according to the rational expectations being reviewed ...