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Money Demand

The Equation of Exchange

The equation of exchange, often expressed as M = k P Y or M V = P Y, plays central roles in both aggregate demand curves and demand for money.  A special page sorts out these roles for various macroeconomic theories.

Transactions Demand

Velocity is a function of the interest rate.  That is, M V(R) = P Y.

Speculative Demand

Precautionary Demand

Foreign Holdings



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