chapter  28
13 Pages

ENDOGENOUS MONEY

BySheila C. Dow

The quantity of money was important to the argument of The General Theory as the factor, along with liquidity preference, determining the rate of interest and thereby effective demand. The subject of this chapter is the determination of the quantity of money, first as expressed by Keynes and second in the modern literature which reflects the evolution since Keynes’s day of monetary behaviour and institutions. In the process the conventional wisdom that Keynes in The General Theory understood the money supply to be exogenous is challenged. Furthermore, the argument is developed that the determination of the stock of money and liquidity preference are interdependent, and that this interdependence is evident in Keynes’s thought.