How does Keynes’s position differ from Wicksell and Fisher on the role of money and the consequences of monetary policy?

Most classical theorists such as Fisher and Wicksell held that speed or velocity was only stable and independent of the prevailing economic activity. On the other hand, Cambridge economists, including Keynes, challenged this position. Keynes did not assume the existence of money demand and supply as having a possible equilibrium, which accounted for people holding more money during an economic surge.

In his view, just like the views of other Cambridge economists, Keynes believed that people held cash for two primary reasons: to maintain liquidity and to facilitate the transaction.
In 1898, Wicksell’s first publication contemplated that cumulative inflation is the result of an increase in the real interest rates or when a powerful banking system determines the market rates. In addition, this happens in a regime where a banking system causes the average rate to fall. Wicksell’s assumption was that money would increase without necessarily increasing the quantity of currency in circulation. In this case, individuals would make profits and turn their returns into bank deposits, which in turn increase the money supply.

Answer by Academic.tip's expert
An answer to this question is provided by one of our experts who specializes in business & economics. Let us know how much you liked it and give it a rating.

Cite this page

Select a citation style:

References

Academic.Tips. (2022) 'How does Keynes’s position differ from Wicksell and Fisher on the role of money and the consequences of monetary policy'. 28 November.

Reference

Academic.Tips. (2022, November 28). How does Keynes’s position differ from Wicksell and Fisher on the role of money and the consequences of monetary policy? https://academic.tips/question/how-does-keyness-position-differ-from-wicksell-and-fisher-on-the-role-of-money-and-the-consequences-of-monetary-policy/

References

Academic.Tips. 2022. "How does Keynes’s position differ from Wicksell and Fisher on the role of money and the consequences of monetary policy?" November 28, 2022. https://academic.tips/question/how-does-keyness-position-differ-from-wicksell-and-fisher-on-the-role-of-money-and-the-consequences-of-monetary-policy/.

1. Academic.Tips. "How does Keynes’s position differ from Wicksell and Fisher on the role of money and the consequences of monetary policy?" November 28, 2022. https://academic.tips/question/how-does-keyness-position-differ-from-wicksell-and-fisher-on-the-role-of-money-and-the-consequences-of-monetary-policy/.


Bibliography


Academic.Tips. "How does Keynes’s position differ from Wicksell and Fisher on the role of money and the consequences of monetary policy?" November 28, 2022. https://academic.tips/question/how-does-keyness-position-differ-from-wicksell-and-fisher-on-the-role-of-money-and-the-consequences-of-monetary-policy/.

Work Cited

"How does Keynes’s position differ from Wicksell and Fisher on the role of money and the consequences of monetary policy?" Academic.Tips, 28 Nov. 2022, academic.tips/question/how-does-keyness-position-differ-from-wicksell-and-fisher-on-the-role-of-money-and-the-consequences-of-monetary-policy/.

Copy