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Economics / August 19, 2021

Cash Balance Approach

• It states that it is not total money but that portion of cash balance people spend that influences price level. • True people hold cash balance in their hands instead of spending the entire amount all at once. • The equation is M = PKT. • Here, M = money supply, P = price […]

By · August 19, 2021 · 1 min read

• It states that it is not total money but that portion of cash balance people spend that influences price level.

• True people hold cash balance in their hands instead of spending the entire amount all at once.

• The equation is M = PKT.

• Here, M = money supply, P = price level, T = total volume of transaction, K= the demand for money the people want to held in hand.