Theories of Money Demand (Chapter 20)
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10 Terms
Baumol-Tobin Model - N equation
Baubol-Tobin Model - Money demand equation
Quantity Theory of Money - Equation of exchange
MV = PY
Quantity theory of money - What happens if people often use credit cards? (PY constant)
M falls so V increases
Quantity theory of money - What happens if people often use debit cards? (PY constant)
M increases so V falls
Quantity Theory - inflation formula
Cambridge Money Demand - equation for money demand
Keynes Liquidity Preference
Motives for holding money
Transactions demand: $ to carry out transactions
Precautionary demand: people hold $ as a buffer to cover unexpected expenses or emergencies
Speculative demand: people hold $ to take advantage of potential future changes in interest rates or bond prices
During recessions the velocity of money tends to
decrease
During periods of economic growth velocity of money tends to
increase
Note 
Flashcards (29)