ECON 319 Lecture Notes - Lecture 10: John Maynard Keynes, Thomas Tooke, Money Illusion
Document Summary
Did a lot of work on monetary policies mainly in response to help britain fund. It is possible to reach equilibrium with involuntary unemployment. Government intervention is needed to restore economic growth. Keynes main aim is to salvage capitalism which includes the need to address incentives for investment. Liquidity preference: three types of demand for money, namely: precautionary, speculative, transactions. Is-lm apparatus (devised by oxford professor, john hicks) The preliminary idea #1. is the quantity theory of money: This tells us that when you multiply the supply of money with the velocity of money it will equate to the price level multiplied by the level of transactions. *concept: if the money supply is increased the overall price level will rise (inflation) and the opposite is true. Main idea #2 is the cash-balance approach which is actually thought of by thomas. Tooke et al. which says that cash balances is just m/p where p is the purchasing power of money.
