WORKING PAPER

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WORKING PAPER No. 30/2016

Is Cash Dead? Using Economic Concepts

To Motivate Learning and Economic Thinking

Philip Gunby 1

Stephen Hickson 1†

November 2016

Abstract: Economics is at its best when used to shed light on questions of interest to students.

Even better if the answers are at odds with commonly held but incorrect views. The velocity

of circulation is probably the most neglected concept in macroeconomics classes but it can be

used to open up a discussion on the behaviour of people and why demand for money may rise

or fall. It can be used to address the question “Is Cash Dead?” Despite the rise in the number

of ways that people can pay without using cash, there seems to be no drop in the amount of

cash people actually wish to hold. This is a puzzle and a good opportunity to get students

thinking about why this might be.

Keywords: Principles of Economics, Velocity of Circulation, Cashless Society

JEL Classifications: A22

1

Department of Economics and Finance, University of Canterbury, Christchurch, NEW

ZEALAND

† Corresponding author is Stephen Hickson. Email: Stephen.hickson@canterbury.ac.nz

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