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- Title
SOME FUNDAMENTALS IN LIQUIDITY THEORY.
- Authors
Bronfenbrenner, M.
- Abstract
This article discusses the theory of economic liquidity and its applications to problems in monetary analysis. An elementary definition of money on liquidity-preference principles includes many words of art in addition to liquidity itself. It might run somewhat as follows: a monetary commodity is one whose liquidity is sufficiently high to all individuals in a particular society to justify its use for cash balance purposes, and the society's total money balance is made up of the total amount of these commodities actually held in cash balances. To begin with the cash-balance use, goods devoted to this use, or held in cash balances, are held expressly for the purpose of future direct exchange for other goods, which are unspecified in advance. If one holds government bonds, intending to sell them when he decides to buy, say, a house, these bonds also form no part of his cash balance. They must be converted into cash before they can be used to buy the house. A sufficient condition, then, for a commodity being considered monetary is that it has actual cash balance use.
- Subjects
LIQUIDITY (Economics); CASH flow; UTILITY theory; FINANCE; ECONOMIC demand; BONDS (Finance)
- Publication
Quarterly Journal of Economics, 1945, Vol 59, Issue 3, p405
- ISSN
0033-5533
- Publication type
Article
- DOI
10.2307/1884572