Professional Documents
Culture Documents
Money
Supply Demand
It is determined as per
the requirements of the
economy and not by RoI
Active Cash Idle Cash
SSm
RoI
Balance Balance
Transactionary Speculative
Motive Motive
Precautionary
Mo
Sm
Motive
The SSm is Perfectly DACB = f+ve (Y) DICB = f-ve(i)
RoI Inelastic
Keynesian RoI Determination (LPT) - continued
The LP curve is SHAPED -vely by DICB
Demand for Money As DICB = f (RoI),
When RoI increase, less money will be
demanded for speculation
When RoI decrease, more money will be
RoI demanded for speculation
Dm
Keynesian RoI Determination (LPT) - continued
DY2
NI NI RIE
DY1
RE
Steeply sloped
Gently sloped
LP1
LP2
Dm Dm
Keynesian RoI Determination (LPT) - continued
RoI is determined at the point
RoI where the LP curve intersects the
SSmo SSmn Supply curve of money
LP2