ABSTRACT
This is a core analytical chapter from a microeconomic perspective on money in the economy. It treats real balances as a good like other goods such as commodities and labour in the economy and derives their demand in the overall context of the demands and supplies for all goods in the economy. It uses these in a Walrasian general equilibrium model to determine the relative and absolute prices of goods and examines their properties. In particular, it addresses rigorously the controversial and important questions of the neutrality and super-neutrality of money.
