Beginning of Essay
In summary of Michael Darby’s article involving , three specific effects emerge as the most influential. Darby suggests that an increase in the rate of growth of the money supply leads to a pattern of changes in the interest rate that reflects the interaction ....

Middle of Essay
.... Theory Darby’s empirical argument is that the growth path of income and price level are not affected immediately after a change in money supply growth and that the nominal interest rate must fall over time to restore equality of money supply and demand. The immediate impact of monetary policy on the interest rate is known as the liquidity effect. However, over time “aggregate demand for goods is increased both by direct impacts of the falling interest rate on investment demand and of excess cash balances on purchases of consumers’ durable goods and by indirect multiplier effects of the direct increase in spending” (Darby 1975). This t ....