Question

Which of the following are Non-monetary theories of inflation.

a) Nicholas Kalder’s Hypothesis

b) The P-Star Price Determination Theory

c) Hansen’s Theory Of Inflation

1. a only
2. a and b  only
3. c only
4. a, b and c 

Answer 1

Correct Answer - Option 2 : a and b  only

The correct answer is a and b  only.

• Inflation - Inflation is a sustained increase in the general level of prices of goods and services and a decline in the value of a currency.
• The theories of inflation try to explain the causes of inflation.

• Non-monetary theories of inflation- 
  • The Natural Rate Of Hypothesis.
  • Nicholas Kalder’s Hypothesis.
  • He Micro-Economic Interpretation Of Inflation.
  • The P-Star Price Determination Theory
  • Harberger’s View.
  • The Relationship Between Money Market & Price Behaviour.

• Monetary theories of inflation-
  • The Classical Quantity Theory Of Money-   
    • If the amount of money in an economy doubles, price levels also double, causing inflation.
  • The Cash Balance Approach (Cambridge Version)-
    • According to the Cambridge economists, the price level is affected only by that part of the money which the people hold in the form of cash for transaction purpose, not as suggested by the classical theory
  • The Keynesian Theory-
    • It demonstrates that if the deficiency of aggregate effective demand is the cause of unemployment, then the excess of it is the cause of inflation.
  • Hansen’s Theory of Inflation.
  • Milton Friedman's Model.
  • The Phillips Curve Analysis.