Demand for money / Monetary policy

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Page modified: Friday, June 23, 2006 20:55:08

Demand for money (also liquidity demand, cash attitude) one calls the need of the restaurant subjects according to money. In accordance with the money functions money is used as payment and value storage means as well as arithmetic and logic unit and for these purposes of the restaurant subjects also inquires.

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Components of the demand for money

Transaction cash

The classical authors see an article of exchange, which permits the bartering between specialized restaurant subjects in money above all. One speaks also of the transaction cash (L_T).

The demand for money as currencies is the higher in accordance with the quantity equation, the income and the price level is the higher and the smaller the peripheral speed is.

Speculation cash

John May pool of broadcasting corporations Keynes supplemented the money attitude in his Keynesiani total model for transaction purposes around the money attitude for value storage purposes. This designated it as speculation cash (L_S).

It contains, differently than the name to assume leaves, not fortunes for speculation purposes is held, but fortune, which is held in the form of money. For money as value storage means in accordance with Keynes its high as well as his small exposure to loss speak. Against money attitude for value storage purposes speaks the which exists in form of escaped interest.

Caution cash

Beside the speculation cash Keynes introduced also the caution cash. It contains money, that from the restaurant subjects (more exact: ) one holds for the non-banks, in order to be able to accomplish unexpected transactions. It is necessary, because the restaurant subjects are uncertain over their future situation and cannot these foresee exactly.

The more highly the income, the more largely is the material extent of the caution cash. That is because of the fact that with increasing income also more (foreseeable) are transacted transactions (see transaction cash), which bring again uncertainties over necessary spare purchases or repairs with itself. The caution cash is frequently not in-towards-constantly considered in models, but summarized for simplification under the transaction cash.