Lecture 9_EC332[1] - Lecture 9 The Demand For Money Demand...

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Lecture 9 he Demand For Money The Demand For Money
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Quantity Theory of Money Velocity PY = V M Equation of Exchange MV = PY Quantity Theory of Money 1. Irving Fisher view: V is fairly constant 2. Eq. of Exchange no longer identity 3. Nominal income, PY , determined by M 4. Classicals assume Y fairly constant etermined by 5. P determined by M
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uantity Theory of Money Quantity Theory of Money Quantity Theory of Money Demand Y 1 × PY M =— V M d = k × PY Implication: interest rates not important to M d
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ambridge Approach Cambridge Approach Looks at motives for holding money 1.Medium of exchange—related to Y . tore of Wealth lated to 2.Store of Wealth related to Y M d = k × PY Looks like Quantity Theory, but is different 1. k could fluctuate in short-run because of change in i and RET e
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ambridge Approach Cambridge Approach Is Velocity Constant? lassicals thought onstant cause didn’t 1.Classicals thought V constant cause didn t have good data 2.After Great Depression, economists realized velocity far from constant
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hange in Velocity from Year to Change in Velocity from Year to Year: 1915–96
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This note was uploaded on 02/29/2012 for the course ECONOMICS EC 3332 taught by Professor Shandre during the Spring '12 term at National University of Singapore.

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Lecture 9_EC332[1] - Lecture 9 The Demand For Money Demand...

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