Traditional Culture Encyclopedia - Traditional culture - Briefly describe the content of Keynes's theory of money demand and Keynes's contribution to the development of the theory of money demand.

Briefly describe the content of Keynes's theory of money demand and Keynes's contribution to the development of the theory of money demand.

The main content of Keynes's theory of the demand for money :

The three main motives for the demand for money: the transactional motive, the precautionary motive, and the speculative motive

The first motive has a stable demand for money, which can be predicted in advance;

The first motive has a relatively stable demand for money, which can also be predicted;

The third motive has an unstable demand for money because it is closely related to a person's expectations of future money expectations are closely related and are strongly influenced by subjective factors such as psychological expectations.

Money demand function: Md=M1+M2=L1(Y)+L2(i)=L(Y,i)

Characteristics of Keynesian theory of money demand:

One of the distinctive features of Keynesian theory of money demand is that speculative demand for money is included in the range of money demand, so not only the scale of commodity transactions with its price level affects the demand for money, but also the The change of interest rate is also an important factor affecting the demand for money. According to the above ideas, Keynes put forward an important policy theory: that is, the government can realize the monetary policy objectives by lowering the interest rate, expanding the money supply, and promoting enterprises to expand investment and increase employment and output in the case of insufficient domestic effective demand.

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