Characteristics of Keynes Theory of Money

Characteristics of Keynes Theory of Money

1.    Money can Store Value

Keynes theory of money put light on another function of money i.e. money can store value. Keynes explained that due to this quality of money, there is linkage between current & future demand of money.

2.    Speculative Demand of Money

Keynes also explained that in addition to transaction demand, money also has speculative demand, which depend on the rate of interest.

3.     Supply of money & interest rate

Keynes establishes a link between supply of money and interest rate, as supply of money increases, rate of interest decrease. There is inverse relationship between supply of money and interest rate.

4.    Money supply Generate economic activity

Money has role in generating economic activity, in case money supply increase, it will boost the investment in the economy, which would create employment.

5.    Inflation & Deflation

There may be equilibrium of national income above the full employment level (inflation) and there equilibrium of nation income below full employment. (Deflation)

6.    Money Generate employment

Public expenditure by the government or increase investment level in the economy due to lower interest rate generates economic activity & employment in the country. Therefore money has role other than monetary role.