|
|
|
|
|
|
by zhte415
1186 days ago
|
|
|
Precautionary demand for money isn't inflationary - it has a low velocity i.e. just sits, in it's precautionary state. [1 for an example during Covid lockdowns in AU]. The identity is MV=PY where M is money, V is velocity, P is the price level and Y is real income. [2]. A precautionary demand has a lower V. While a rise in narrow money may be expected, there may be a fall in in broader money, typically much larger than M1, driven by a reduction in sought exposure to non bank financial companies. [1] https://www.rba.gov.au/publications/bulletin/2021/mar/cash-d... [2] https://en.m.wikipedia.org/wiki/Quantity_theory_of_money |
|
|