14

Diagr
between
quantityammat ic
quantity
of
SHIVA D.U., B.COM.
Reprmorneyesentandation.
of The (HONS.)
givenmoney of pricrel atio nship
in the and the valuegeneral (P)

diagram-A diagram.
and B. Part ThereAare twomoney e-l e
are vel
parts shown
and LevelYA Part A

relationship
and Part B between price
indicates
value of money level indicates
and the
of the
direct
Price

both
the
inverse quantity of
parts of the and quantity ofrelationship between
that when money
MoneyPo
Mg MË
OM, then quantity diagram
of
at a money.
Lookingclearat
time, it becomes
of
Value
P
Quantmoneyity of X

price level money increases

value of money increases from OP,fromto OP,
OMo to Part B
Key declines from O
1

Po to O
and Mo M
P

(i)assumpt
Money ioinns of the
Classical
(M) Theory
Quantity of money
X

proport
M wouldio nat ecirculation
ly in the same and
of Money
credit in are:
(ii) T, i.e., also be
numnberIn of doubled. circulation
direction. For example, if Mis (M) change
unchanged.
(iii) V othertransactions for which doubled then
and V', i.e., words, there is no money is demanded,
(iv)
Number of ofvelocities of money and change in the demand for remains
the number barter
transactions
such continue credit do not
to be the change. money.
In this way,
same.
transactions for which money
same. In
is not other words,
place in treating V, V,
to the and T as fixed,
needed, is the
doubled, proportion
Q. 4. price level will be changes in M changes
and
in
M,. price level (P) would take
Or,
Give Keynesian doubled Therefore,
and value of
money
approach to demand for money. halved.
if M and M, are
Demand for money
interest. Explain. depends not only on
Ans. According to Keynes, income but also on rate of
transaction, andprecautionary and "Money is The demanded because of three motives -
convenience
demand for moneycertainty.
speculative.
The third motive first two motives provide yield of
() as liquidity preference. provides yield." Keynes has termed
(cash) toTransaction
meet their motive. People like to keep their
and spending of theirday-to-day expenses during the period money in liquid form
bridge the gap betweenmoney. The
the receiptnecessity
between the receipt
for liquidity on this
a firm of income and its spending. An
receives income at a particular fixed account arises to
a period of
time and in order to meet time while its spending isindividual
spread
or
money in cash is needed. The these expenses, as and over
when
such expenses, depends upon
amount of money, which an individualthey
needs
arise,
called by Keynes as his income. This mnotive for liquidity has for
"Transaction motive'. Liquidity preference on account ofbeen
motive is interest-inelastic.
this
(ii) Precautionary
motive.
unforeseen contingencies in theBesides day-to-day transactions, there are many
life of individuals for which they hold money.
The desire of the people for holding
money under the precautionary motive is
FESS Fesshole
HOLE @fesshole

I'm 37. Instead of regretting that

l can'twake up age 18 again, I
pretend to myself that I'm 90
and I've woken up age 37 again,
and that I get to magically,
wonderfully have the next 50
years again.
10:25-21 Sep 21 - fesshole
Posted in r/GetMotivated by u/KMGritz reddit