Question

What is money (how do we use the term)? In a Classical Model what is the role and impact of money? What role does Keynes assign to money?

Answer 1

The money has been defined differently by different economists. The most acceptable definition of money can stated in terms of all the functions of money. So many is anything which is generally accepted as a medium of exchange, measure of value, store of value and means for standardd of deferred payment.

In the Classical model, the main function of money is to act as a medium of exchange. it is to determine the general level of prices at which goods and services will be exchanged.

According to the keynesian the money has played another role, which is store of value. He said that money can be easily stored for future use. It is the most convenient and economical means of storing earning and wealth. It has the merit of general acceptability and its value remains stable as compared to other goods.