2. NOOK Book. Cyclical fluctuations are caused by expansion and contraction of bank credit. View All Available Formats & Editions. This monetary explanation of the trade cycle has received powerful support from Milton Freidman, who says, “In every deep depression, monetary factors play a critical role.” According to Freidman, there is a direct relation between the volume of money supply and the level or … The consumers’ income is the aggregate of money income=national income or community’s income in general. The development of business cycle theory was closely related to the development of monetary theory. Monetary theory posits that a change in money supply is the main driver of economic activity. It serves as a primer into Hayek’s monetary and capital theories. Business-Cycle Conditions Print “It seems certain, however, that we shall merely make matters worse if we aim at curing the deflationary symptoms and, at the same time (by the erection of trade barriers and other forms of state intervention) do our best to increase rather than to decrease the fundamental maladjustments. Historically, this also holds for the general glut controversy of classical political economy or the crisis theory of the nineteenth century, which centred around Say’s Law, and where the issue at stake was whether general overproduction of commodities was possible or whether money was neutral. Von Hayek, Nicholas Kaldor (Translator) Paperback $ 11.95. Monetary Theory. According to him the flow in the monetary demand leads to prosperity or depression in the economy. 87 likes. $11.95. Monetary Theory and the Trade Cycle. According to Hawtrey, “The trade cycle is a purely monetary phenomenon because general demand is itself a monetary phenomenon.” Hawtery was of opinion that in every deep depression, monetary … A simple formula governs monetary theory, MV = PQ. $2.99. According to Professor Hawtrey, all the changes in the business cycles take place due to monetary policies. Monetary Theory and the Trade Cycle 246. by Friedrich A. "Monetary Theory and the Trade Cycle," published in 1933, was translated from the German by N. Kaldor and H.M. Croome. Let us make an in-depth study of the Hawtrey’s pure monetary theory of the trade cycle. The consumers’ outlay is the aggregate of money spendings on consumption and investment. 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