Give the differences between the cash balance and transaction approaches which make cash balance approach more superior.

Answers

- Fisher’s transaction approach lays stress on the medium of exchange function of money, ie according to it; people want money to use it as a means of payments for buying goods and services. On the other hand, cash balance approach emphasizes the store of value function of money. They hold money so that some value is stored for spending on goods and services after some lapse of time.

- In explaining the factors which determine the velocity of circulation, transactions approach points to mechanical aspects of payments methods and practices such as frequency of wages and other factors payments, the speed with which funds can be sent from one place to the other, the extents to which bank deposits and cheques are used in dealing with others while k in the cash balance approach is behavioral in nature. It is bulk around the demand for money however little. It can easily lead to stress being placed on the relative usefulness of money as an asset

- Thirdly the cash balance approach explains the determination of money value in the framework of demand and supply of money.

Kavungya answered the question on March 26, 2019 at 06:21

Next: Give an example to demonstrate that waves carry energy
Previous: The figure below shows a beaker containing molten candle wax. Indicate on the same diagram the position of the centre of gravity. When the candle...

View More Monetary Theory and Policy Questions and Answers | Return to Questions Index

Give the differences between the cash balance and transaction approaches which make cash balance approach more superior.

Answers

Exams With Marking Schemes

Related Questions