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Terminology
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cash in advance model
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The cash-in-advance constraint is a modeling idea. In a basic general equilibrium there is no need for money because exchanges are automatic, through
cashnet500. To study monetary phenomena, a class of models was made in which money was required to make purchases of other goods. In such a model the budget constraint is written so that the agent must have enough cash on hand to make any consumption purchase. Using this mechanism money can have a positive price in equilibrium and monetary effects can be seen in such models.
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