The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Demand for Money: Theoretical Studies

  • Bennett T. McCallum
  • Marvin S. Goodfriend
Reference work entry


In any discussion of the demand for money it is important to be clear about the concept of money that is being utilized; otherwise, misunderstandings can arise because of the various possible meanings that readers could have in mind. Here the term will be taken to refer to an economy’s medium of exchange: that is, to a tangible asset that is generally accepted in payment for any commodity. Money thus conceived will also serve as a store of value, of course, but may be of minor importance to the economy in that capacity. The monetary asset will usually also serve as the economy’s medium of account – that is, prices will be quoted in terms of money – since additional accounting costs would be incurred if the unit of account were a quantity of some asset other than money. The medium-of-account role is, however, not logically tied to the medium of exchange (Wicksell 1906; Niehans 1978).

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Bennett T. McCallum
    • 1
  • Marvin S. Goodfriend
    • 1
  1. 1.