Abstract
The model of the previous chapter is invalid, due to the contradiction between Walras’ Law and the quantity equation. That problem can be solved by the introduction of the real balance effect. Let the purchasing power of money be defined as M*/p, which shall be referred to as real balances. In this section we shall assume that money is the only form in which people can accumulate and hold wealth. A more general treatment of wealth-holding will be presented in Chapter 7.
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© 1989 John Weeks
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Weeks, J. (1989). Logically Consistent Money-neutral Models. In: A Critique of Neoclassical Macroeconomics. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-20296-6_6
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DOI: https://doi.org/10.1007/978-1-349-20296-6_6
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-0-333-49382-3
Online ISBN: 978-1-349-20296-6
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