We have argued in Chapter 12 that the simple-sum method of aggregation makes strong a priori assumptions about substitution effects and the result is a set of monetary aggregates that do not accurately measure the actual quantities of the monetary products that optimizing economic agents select (in the aggregate). We also surveyed the microeconomic theory of monetary aggregation, as it has evolved during the past twenty years, using a model of the optimizing behavior of representative economic agents.
KeywordsMonetary Policy Marginal Utility Currency Equivalent Monetary Aggregate Divisia Index
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