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Home » Economics Homework Help » Macroeconomics Help » Money Market Analysis
Money Market Analysis
In this particular aspect of macroeconomics we have discussed about various theories of money and interest. Macroeconomic theories can be grouped broadly under four categories, viz, product market analysis, money market analysis, integrated, analysis of the product and money and money markets, and macroeconomic problems and policies. In this part we deal with the theories related to the money market, including theories of demand for and supply of money and money sector equilibrium. This part explains the sources, measures and the modern theory of money supply, it also discusses classical and the Keynesian theories of demand for money and the determination fo the interest rate, respectively, given the supply of money and presents a brief discussion on the post-Keynesian developments in the theory of demand for money.

In general usage, the term money means currency notes and coins held as cash in hand or chequeable deposits with banks. In economics, however, the term money is used in a much wider sense and is defined differently by different economists. There is no universally agreeable definition of money. as Walters has remarked, “throughout the history to the present day there is no agreement of the most fundamental of questions-what is money?” the definition of money has been rather a controversial issue. Conceptually, money can be defined as any commodity that is generally accepted as a medium of exchange and a measure of value. Historically, many commodities have preformed these functions of money, and forms of money have been changing from cattle to credit cards. Therefore, an empirical question arises as to what should be and what should not be included in the actual count of money. This remains as unsettled issue. Money plays a very important role in economy. But both excess and shortage of money supply of money supply are harmful to the economy. Therefore, money supply has to be controlled and regulated in accordance with the requirement of the economy. It is for this reason that measuring money supply do not provide clear answer to though definitions of money do not provide clear answer to what is or what is not money, in practice, some methods and measures are used to measure the supply of money. In this aspect, we will discuss three major aspects of money supply: (i) the sources of money supply, (ii) the measures of money supply, and (iii) the theory of money supply.

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