LECTURE:2

Approaches to demand for money

1. Fisher's Transactions Approach: All transactions involving purchase of goods, services, raw
materials, assets require payment of money as value of the transaction made.
MV=PT
2. The Cambridge Cash-Balance Theory of Demand: It places emphasis on the function of
money as a sotre of value or wealth instead of medium of exchange.
Md= kPY
3.Tobin's Portfolio Approach: Depicting the relationship between rate of interest and demand
for the money ( Risky and Safe)
4. Baumol's Inventory Approach: money is the opportunity cost of funds.
5. Friedman's Theory: The demand for money ,merely as an applications of a general theory of
demand for capital assets.
Md= f (W,h,rm,rb,re,P,U)
Attachments:
VNIT V Money and Demand for money Unit V Money -Demand for Money
Reference:Economic Environment of Business H.L.Ahuja pp-263-278

Prepared by MBA\MRS R.CHITRA[ASSISTANT PROFESSOR\TSBA004]

24/11/09