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Supply and demand for real money balances. We then add up the cash balances held by all holders of money in the community and express the total as a fraction of their total income.” Thus we can write:where M stands for the exogenously determined supply of money, k is the fraction of the real money income (PY) which people wish to hold in cash and demand deposits, P is the price level, and Y is the aggregate real income of the community. ADVERTISEMENTS:The Cambridge cash balances equations of Marshall, Pigou, Robertson and Keynes are discussed as under:Marshall’s Equation:Marshall did not put his theory in equation form and it was for his followers to explain it algebraically. Friedman has explained Marshall’s views thus: “As a first approximation, we may suppose that the amount one wants to hold bears some relation to one’s income, since that determines the volume of purchases and sales in which one is engaged.

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