Criticism of Cash balance approach | Comparison | Superiority | Importance | Part-4 | EK:)

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This lesson discuss the Criticism of Cash balance approach, Comparison between Transaction and Cash balance approach, Superiority of Cambridge Approach, Importance of Quantity Theory

Following points are discussed:

Criticism of Cambridge Approach
1) Unreal Assumption
2) Ignores Speculative Demand for Money
3) Circular reasoning
4) Incomplete Theory
5) Ignores the effect of the Rate of interest
6) Ignores the influence of Real Factors
7) Lack integration between the Theory of Value and the Theory of Money

Comparison between Transaction and Cash balance approach
Similarities
1) Same Conclusion
2) Same Equations

Dissimilarities
1) Functions of Money
2) Velocity of Circulation
3) Flow and Stock
4) Price level
5) Demand for Money
6) Nature
7) Emphasis on Demand and Supply
8) Trade Transactions

Superiority of Cambridge Approach
1) More Realistic
2) Cause and Effect relation
3) Basis of Liquidity Preference Theory
4) Easy Calculation
5) Explanation of Trade Cycles
6) Broader Concept of the demand for Money
7) Short Period
8) Applicable under all circumstances of employment
9) Relation of National Income with the Value of Money
10) Based on Micro factors

Importance of Quantity Theory
1) Explanation of the Main cause of Change in Price
2) Control over Prices

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#cambridgeapproach
#comparison
#superiority
#importance
#money