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Sneha posted an Question
September 07, 2020 • 08:08 am 30 points
  • UGC NET
  • Economics

Critically explain don patinkin theory of demand for money.

Critically explain Don Patinkin theory of Demand for money.

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    Nidhi taparia Best Answer

    To put it simply, Don Patinkin's theory of money demand was published as an improvement over the Classical Quantity Theory of Money. Patinkin stated that prices and money are related through the real balance effect. Real balance means the wealth people hold relative to current prices. So say when prices rise, the same amount of wealth will become less valuable because now less goods and services can be bought from it. When prices fall, wealth will become more valuable because now more goods and services can be bought from it. Consequently demand for money is actually demand for real balances.

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