ABSTRACT
This chapter shows the demand for money is a demand separate from the things money can buy, and its satisfaction must compete with the satisfaction of other wants, as other wants compete with it for the available limited funds. There are several meanings that might be attached to the term the demand for money, but there are only two that need to be considered here. The demand for money as a store of buying power should be one of the most basic concepts in economic literature. In the traditional literature, the concept of the demand for money in exchange was often introduced as an alternative way of speaking of the aggregate offering of goods. It is this last that provides the first basic assumption underlying the monetary theory of aggregate demand, namely the assumption that the propensities to consume and invest are higher with a large real stock of money than with a small real stock.
