Theoretical Analysis of the Demand for Money

This paper will appear in The New Palgrave: A Dictionary of Economic Theory and Doctrine, to be published by the Macmillan Press, Ltd.

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, but may be of minor importance to the economy in that capacity.