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.

Classical Theory of Money

Classical Theory of Money Concept

Classical theory of money describes money as medium of exchanges and denies any real role of money in the economy i.e. impact or influence over income & employment.

1.    Medium of Exchange

Classical theory of money says money works as medium of exchange i.e. moneys is used to perform transaction. It means classical theory only recognize only transaction demand i.e. money is just needed to perform transactions.

2.    No Role in Economic Activity

Classical theory says that money has no role in generation of economic activity. Moreover money has no influence over the real factor of economy i.e. income, employment.

3.    Money is just facilitator

Classical theory of money says that money is just a facilitator in the market. It facilitates the transaction to be happen i.e. exchange of goods & services. Classical economist say money is like road which facilitates but does not create anything.

4.    No influence over Quality

Classical theory of money also denies money role in the quality of product. It means increase or decrease in price has no relevance with the quality, rather increase and decrease in prices relates to supply of money.

5.    Monetary Role

Classical theory recognizes monetary role of money i.e. impact on price & wage rate. It says that prices will increase with increased supply of money; similarly prices would decrease with decreased supply of money.

Performance Pyramids Theory Characteristics

Performance Pyramids Theory Characteristics

1.    Different level

Pyramids approach focuses on fact that organization work at different level. It means that different department and manager have different tasks and objectives and every department is interested to achieve those objectives.

2.    TOP Level Objective is Target

Every level of hierarchy have different performance targets, however, each level should support top level objective. It means despite having different objective, there is a linkage between these objective i.e. lower hierarchy objectives should support higher hierarchy objective.

3.    Customer Satisfaction

Customer satisfaction is one of the key objectives .it means customer satisfaction should be given due consideration by the organization and any negligence in this part is not acceptable situation for organization.

4.    Flexibility

Organization must be flexible both internally & externally. It means that organization must be able to respond the changes occurring in the business world. In modern world the business required dynamic approach for existence and growth.

5.    Productivity

Organization must focus on the productivity i.e. effective utilization of resources. In modern business competitive advantages is key for success, organization should increase the productivity of the organization to be more competitive.

Balanced Approach Theory Characteristics

Balanced Approach Theory Characteristics

1.    Long Term Measurement

Performance is measured in relation to long term objectives. The basic criteria of balance approach is achievement of long term objective, however, short term objectives are given due consideration to achieve long term objective.

2.    Financial & Non financial Aspects

Organization has financial and non financial aspects. Primary aspect is financial aspect, however, non financial aspect should also be given due consideration.

3.    Setting Targets

In balance approach targets are set for each aspect of the business. Organization tries to achieve the set targets.

4.    Conflicting objective

In balance approach there may be conflicting objective and therefore a balanced approach is recommended to achieve long term objective. This balanced approach is key to achieve the long term objective in a balance way.

5.    Four aspect

In balanced approach there are four aspect of organization i.e. customer prospect, internal prospect, innovation & learning and financial aspect. For each aspect measuring tool are defined or identified.

6.    Customer Prospect

Organization must identify the customer value and prioritization. In simple term organization must identify the customer value. The customer value may be measured by customer satisfaction, customer retention, customer addition, etc.

7.    Internal prospect

Second prospect is to identify the process required to satisfy customer value or demand from the organization. Measure for internal prospect may include material wastage controls, internal controls, etc.

8.    Innovation & Learning

Third prospect is creating value for the customer, which is off course is not possible without innovation process. Possible measure of innovation & learning is product quality, employee satisfaction, employee efficiency, etc.

9.    Measure the Value

Fourth aspect is to measure the value created by the organization i.e. increase in profitability or earning per share.