Monetary Assumptions From the Classical School Perspective

Out of all the ideas and assumptions regarding the money and monetary theory, the classical liberalism was the first major paradigm that contributed to the development of the quantity theory of money. This paper aims to express the first steps made by the Classical School economists in crystallization of the classical quantity theory. The interest rate is also studied in order to emphasize its effects over the macroeconomic stability. What was the role of money in Smith’s view? What is the relationship between money and interest rate? Does money have an impact over the economic activity?