Question

Arrange the following theories in chronological order starting from oldest to latest: 

(A) Keynesian Theory of Demand for Money 
(B) Quantity Theory of Money 
(C) Cambridge Cash Balance Approach 
(D) Modern Quantity Theory of Money 
Choose the correct answer from the options given below: 
 

• A. (B), (C), (D), (A)
• B. (A), (C), (B), (D)
• C. (B), (C), (A), (D)
• D. (C), (D), (A), (B)

Hint:

Understanding the historical development of economic theories helps in tracing the evolution of thoughts on monetary policy and money demand.

Answer 1

The Correct Option is A

 

Step 1: Overview of the theories. 
We need to arrange the theories related to money in chronological order.

Step 2: Chronological Order of Theories: 
- (B) The Quantity Theory of Money was introduced by classical economists like Fisher and Cambridge economists in the early 20th century. 

- (C) The Cambridge Cash Balance Approach came later, developed by economists like Pigou in the 1910s. 

- (D) The Modern Quantity Theory of Money emerged after the Keynesian revolution, particularly post-World War II with the rise of monetarism. 

- (A) The Keynesian Theory of Demand for Money came later in the 1930s, developed by John Maynard Keynes.

Step 3: Correct Chronological Order. 
The correct order, from the oldest to the latest is: - First, Quantity Theory of Money (B) - Then, Cambridge Cash Balance Approach (C) - Followed by Modern Quantity Theory of Money (D) - Finally, Keynesian Theory of Demand for Money (A).

Step 4: Conclusion. 
The correct order is (B), (C), (D), (A), making option (1) the correct answer.