# Cambridge equation

2023/2/24 17:00:34 4Views cashback forex forexrebatebest (equationofCambridge, Cambridgeequation) Cambridge equation Overview Cambridge equation by the Brit forexbrokerrebateprogramh Cambridge School representative A.C. Pegu proposed a forex broker rebate program dem autorebateforex function also known as the cash balance equation Cambridge equation: is one of the equations of the traditional quantity theory of money to Marshall and Pegu as the representative of the Cambridge School. The Cambridge school, represented by Marshall and Pigou, focused on the behavior of microscopic agents when studying the demand for money. In 1917, Cambridge University Professor Pegu published an article on "The Value of Money" in the Quarterly Journal of Economics, proposing a money demand function of M=kPy, i.e., the Cambridge equation in which y represents real income, P represents the price level, Py represents nominal income, and k represents the ratio of the amount of cash people hold to their nominal income. The demand for money is a function of the ratio of nominal income and the amount of cash people hold to their nominal income. The theoretical basis for Pegus money demand function is A. Marshalls quantity theory of money. According to Marshall and Pigous assumptions, this "physical value" is expressed in terms of The purchasing power of money (i.e., the value of money) is expressed in terms of the amount of wheat that can be purchased per unit of money, and R is the total value of all goods represented by a certain amount of wheat (i.e., the total income and wealth of society), k is the proportion of the spare purchasing power held in the form of money to the total income and wealth of society, M is the amount of money, and P is the value per unit of money expressed in terms of a certain amount of wheat. In the money demand function of M=kPy, y is a constant and is assumed to be constant, because the demand for money depends on the variation of k and P when the nation is fully employed and the economy has reached its maximum level of output, and the variation of k depends on the choice of the assets people have: assets can be invested in physical form to borrow for If you choose to keep it in money form, you will increase the cash balance, and the increase in the cash balance will necessarily increase k. Under the condition that y and M remain unchanged, the increase in k will necessarily increase P, because P=ky/M. This shows that the value of money is proportional to ky and inversely proportional to M. The Cambridge equation The economic significance of this equation is known as the "cash balance theory", which emphasizes the effect of the cash balance that people keep on the value of money and thus on prices. The main difference between the Cambridge equation and the transaction equation is that ① the transaction equation emphasizes the function of money as a means of exchange, emphasizing the expenditure of money; the Cambridge equation emphasizes the function of money as an asset, emphasizing the holding of money. (2) The transaction equation emphasizes the speed of money circulation and institutional factors such as economic and social factors, while the Cambridge equation emphasizes peoples motivation to hold money (3) The quantity of money referred to in the transaction equation is the quantity of money in circulation at a certain time, while the quantity of money referred to in the Cambridge equation is the stock of money held by people at a certain point in time