Problem
1. What is implied about the relationship between money and interest rate when money is made the independent variable and interest rate the dependent variable - that is, when the demand for money function is inverted?
2. In the light of Keynes's view about the difference between risk and uncertainty, explain each of the following ideas from Keynes: (a) it might be rational (rather than simple money illusion) for workers to make labour supply decisions based on relative money wages rather than real wages; (b) households base their consumption and savings decisions on current income rather than wealth. Does the second of these lead you to think differently about the choice of scale variable in the demand for money function?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.