ABSTRACT
Once it is assumed that the propensities to consume and invest are higher with a large real stock of money than with a small real stock, and that they are higher with a high real value of assets than with a low real value, it will be found that the stock of money outstanding and the demand for money are the central determinants of aggregate demand.1 This conclusion is in contrast to that of the saving and investment theory, which makes saving and investment the central determinants. According to that theory, the level of aggregate demand is determined by the relation between the propensities to save and to invest. A change in one relative to the other would change the level of aggregate demand; and with the two propensities given, the level of aggregate demand would be determinate. The dominant position of money can be seen by considering whether it is saving in relation to investment which determines aggregate demand, or only saving in the form of money.
