The Theory of Money and Prices

A 3 minute video by Fraser Institute on Friedman’s theories of money and pricing system.
One of Milton Friedman's keen interests as an economist was how inflation—increases in the overall price level of goods and services—affected the economy.
At the heart of his theory about the cause of inflation is the relationship between money and the availability of goods and services.
Friedman's research revolutionised the way most economists think about money and inflation.
Every economy has a set amount of goods available for purchases.
Inflation refers to increase in the overall price level of goods and services.
In 1963 Friedman and Schwartz completed 800 page “Monetary History of the United States 1857-1960,” which revolutionised how most economists think about money and inflation.
They argued that inflation is always caused by changes in the money supply, compared to changes in the production of goods and services.
Friedman observed that if the supply of money doubles while the amount of goods and services available in the economy remains the same, overall prices and wages would basically double.

The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation.

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