Tutorial_CHAP04程序.pptVIP

The quantity theory (MV = PY) is based on a simple money demand function: it assumes that the demand for real money balances is proportional to income. But, we need another determinant of the quantity of money demanded—the nominal interest rate. The nominal interest rate is the opportunity cost of holding money: it is what you give up by holding money instead of bonds. So, the new general money demand function can be written as: (M/P)d = L(i, Y) This equation states that the demand for the liquidity of real money balances is a function of income (Y) and the nominal interest rate (i