MONETARY THEORY AND POLICY

I. Course Description Monetary theory and policy is concerned with the effects of monetary institutions and policy actions on economic variables (such as inflation and interest rates) that are of importance to individuals and firms. Monetary Policy is considered by many to be of critical importance to the economy II. Course &Outline 1. INTRODUCTION • Definitions and Functions of money • Approaches of money • Evolution of money • Forms of money 2. DEMAND FOR MONEY • The classical theory of demand for money • Cambridge cash balance approach • Keynes’s theory of demand for money 3. POST KEYNESIAN MONEY DEMAND • Tobin’s Portfolio Approach to Money Demand • Baumol Inventory Approach to Transaction Demand for Money • Friedman Theory of Money Demand 4. MONEY SUPPLY • Definition • Measures of Money Supply • Determinants of Money Supply {money multiplier theory} • Size of money multiplier