Abstract
This paper uses the idea behind the well-known Baumol-Tobin model to develop a three-asset model of the transactions demand for money. A number of monetary issues that are not easily discussed in the two-asset framework can be discussed in the context of a three-asset model. Two versions of the model are employed. An LM curve is derived from both versions so that several issues can be explored using IS/LM analysis and the three-asset model can be more easily compared with the two-asset model.
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