Question

explain the theory of cash balance approach​

Answer 1

Answer:

According to cash-balance approach, the value of money depends upon the demand for money. But the demand for money arises not on account of transactions but on account of its being a store of value.

Explanation:

Hope this will help you.

Answer 2

Answer:

According to the cash-balance theory, the demand for money develops because it is a store of value, which determines how much money is worth.

Explanation:

• The demand for money determines the value of money, according to the cash-balance theory.
• The desire for money originates because it is a store of value rather than because of exchanges.
• Money has two qualities that make it suitable for use as a store of value and a medium of exchange:
• it is flat and spherical, and it can sit or fly. "Money flows round in one usage and accumulates up in the other."
• The cash balance approach connects the process of determining a currency's value to the subjective assessments of people who are the true drivers of all economic activity.
• As the demand for money in the cash-balance approach is based on the store of value function of money.
• This technique allows us to shed more light on the somewhat mysterious phenomena of the velocity of circulation of money by probing more deeply into the nature of the demand for money.

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