---
# System prepended metadata

title: 貨幣銀行學 Chapter 20
tags: [貨幣銀行學]

---

# 貨幣銀行學 Chapter 20
###### tags: `貨幣銀行學`
## Preview
1. quantity theory of money and demand of money
2. interest rates and the demand of money objective
3. relationship between money growth and inflation
4. budget deficit :arrow_right: inflation
5. three motives of liquidity preference theory of money([流動偏好](https://wiki.mbalib.com/zh-tw/%E6%B5%81%E5%8A%A8%E5%81%8F%E5%A5%BD))
6. portfolio choice theory of money demand
## Quantity theory of money
### 1.
$$ 
V=\frac{P\times Y}{M}       
$$
  V : velocity(流通速度)
  P : price level
  Y : real output
  M : money aggregate 
  P * Y =aggregate nominal output
:::info
example:
P * Y = 10 trillion
M = 2 trillion
V =5(each dollar is spent 5 times) 
:::
### 2. Equation of exchange 
 $$M\times V = P \times Y
  $$
* we want to know M:arrow_up:(PY:arrow_up:? , V:arrow_down: PY?)
### 3. velocity fairly constant in the short run
$$ 
V = \bar V
$$
Money demand interpretation of quantity theory
$$
M \times V= P \times Y
$$
1. Cambridge view (Marshall and Pigou)
   money demand is proportional to nominal income 
   b/c 1.medium of exchange 
       2.store of wealth
2. In this theory money demand is not a function of interest rate
v = bar v
:::info
ex 
v = bar v = 5
M= 2 trillion PY= 10 trillion
M= 4 trillion PY= 20 trillion
:::

3. Belief of classical economists price and wage are completely flexible 
   output remain at fall-employment level
4. Quantity theory of money and the price level
$$
M\times\bar V = P\times\bar Y
$$$$
P=\frac{M\bar V}{\bar Y}
$$
:::info
ex 
Y =10 apples
M = 5 
V = 2 :arrow_right: 4
P = 1 :arrow_right: 2
money double :arrow_right: price level double
:::

5. Quantity theory and inflation
    * x.y :arrow_right: xy(percentage change) = x (percentagechange)+ Y(percentage change)
    * MV=PY
    MV((percentage change) = PY(percentage change)
    M(percentage change)+V(percentage change) = P(percentage change)+Y(percentage change)
    
6. Empirical evidence 
* long run : 
  1. time series data
  2. cross countries data good
* short run : 
  * not that good
7. Budget deficit and inflation 
* ordinary people(earn/borrow) v.s government(heavy tax/issue bound/print money)
* government budget constraint 
  * G-T = ΔMB + ΔB
  MB : money base
  B : bound
  G-T = DEF
:::info
ex:
DEF = 100 million 
=100(MB) + 0 = 0 + 100(B)
* When DEF > 0,and ΔB=0
:arrow_right: ΔMB>0 :arrow_right:M^s^:arrow_up:
:::
**It is called monetizing the debt**([債務貨幣化](https://wiki.mbalib.com/zh-tw/%E8%B4%A2%E6%94%BF%E8%B5%A4%E5%AD%97%E8%B4%A7%E5%B8%81%E5%8C%96))
8. In practice government issues bounds to the public, and them the central bank purchase bounds from public 
### Keynesian of money demand 
1. liquidity preference theory (流動性偏好理論) b/c he thought
2. 3 motives of money demand 
   * transaction motive payment technology matters 
   ex credit card 
   * precautionary motive(預防性動機)unexpected want 
   * speculative motive 
 3. nominal interest of bonds = 
 opportunity of holding money i :arrow_up = 
 B:arrow_up: M^d^:arrow_down:Putting three motives together 
 $$
 \frac{M^d}{P} = L(i,Y)
 $$
 rewrite :
 $$
 \frac{P}{M^d} = \frac{1}{L(i,Y)}\\
 frac{PY}{M^d}
 $$
 
   
