ON THE MICROECONOMICS OF THE SUPPLY OF MONEY

THIS paper analyses some theoretical issues associated with defining the supply of money. In most expositions of monetary theory, money is conceived as a well-defined stock, the nominal quantity of which is ultimately determined by government. Monetary analyses proceed from an examination of the effects of changes in this stock on the assumption that the behaviour of the users of money is the same as that of the consumers of any purely private good. In this paper we shall argue that these conventions are inaccurate abstractions from the facts of a monetary economy, in that...