Both Keynes’s and Friedman’s theories of the demand for money suggest that as the relative expected return on money falls, demand for it will fall. Why does Friedman think that money demand is unaffected by changes in interest rates, but Keynes thought that it is affected? Furthermore, why does Friedman’s view of the demand for money suggest that velocity is predictable, whereas Keynes’s view suggests the opposite?
b. Some have argued that bitcoins or cryptocurrency is the future of money. Some also contend that bitcoin has no intrinsic value and that it cannot survive as a universally acceptable medium of payments. Discuss the pros and cons of bitcoins as money. What role do you think central bank can play in the emerging digital currency ecosystem?
