Milton friedman-demand function , Managerial Economics

Milton Friedman makes the demand for money a function of the real per capital permanent income. in this study the demand function for money is stated as;

M/NPP= r( YP/NP) δ

Where:

M = nominal stock of money
N = population
Yp = permanent income
Pp = permanent prices

This latter version of the demand for money is not as different from the first version as it appears to be because the concept of permanent income is broad enough to include several variables used in the earlier version of the demand for money . permanent income is affected by yield on securities and human and non human wealth holdings.

According to Milton Friedman, on the basis of empirical evidence the demand for nominal cash balance is represented by the following equation.


M =(0.00323)(Yp/N)1.81 (NPp)

Where all the variables have the same definition as stated above except ,Yp which stands for the real permanent income . in the above form the equation expresses that ( assuming population and permanent prices to be constant ) a 1 per cent increase in real permanent income increase the de4mand for the nominal cash balances by 1.81 per cent. In other words, the Friedman equation for the demand for money indicates that the real permanent income elasticity for the demand for nominal cash balances is 1.81. according to Friedman the causal relationship runs from change in the money supply to change in income .

Posted Date: 12/1/2012 5:12:43 AM | Location : United States







Related Discussions:- Milton friedman-demand function , Assignment Help, Ask Question on Milton friedman-demand function , Get Answer, Expert's Help, Milton friedman-demand function Discussions

Write discussion on Milton friedman-demand function
Your posts are moderated
Related Questions
Ask quesCase Study Electron Control, Inc., sells voltage regulators to other manufacturers, who then customize and distribute the products to quality assurance labs for their sens

Producers Equilibrium or Optimal Combination of Inputs  The analysis of production function has demonstrated that alternative combinations of factors of production that are tech

NATIONAL INCOME ACCOUNTING This refers to the measuring of the total flow of output (goods and services) and of the total flow of inputs (factors of production) that pass thro

Discuss the full cost pricing and marginal cost pricing method. Explain how the two  methods differ from each other.

The International Monetary Fund The International Monetary Fund is a kind of an embryo World Central Bank.  Its objectives are: i.    To work towards the full convertibilit

how much output should a firm produce? 80$ per unit C(Q)=40+8Q+2Qsquared

Variable Reserve Requirement  (Cash and Liquidity Ratios) The Central Bank controls the creation of credit by commercial banks by dictating cash and liquidity ratios.  The ca

#Plot the demand schedule and draw the demand curve for the data given for Marijuana in the case above.question..

The computer graphics chip industry is one with a little number of competitors that earn normal economic profit. Two chip manufacturers, NVIDIA and ATI both face the prospect of lo

What is an effective need of demand 1.  An Effective Need: Effective need demands that there must be a need supported by the capacity and readiness to shell out. Henceforth there