Friedman vs. Keynes

Friedman vs. Keynes

When comparing the money demand frameworks of Friedman and
Keynes, several differences arise Friedman considers multiple rates of return and considers
the RELATIVE returns to be important

Friedman viewed money and goods as substitutes.
Friedman viewed permanent income as more important than
current income in determining money demand

Friedman's money demand function is much more stable than
Keynes'. This is because permanent income is very stable, and

the spread between returns will also be stable since returns
would tend to rise or fall all at once, causing the spreads to
stay the same. So in Friedman's model changes in interest
rates have little or no impact on money demand. This is not
true in Keynes' model.

If the terms affecting money demand are stable, then money
demand itself will be stable. Also, velocity will be fairly
predictable (since Md is not affected by r).