| Abstract: | In the neoclassical monetary growth literature, the rationality condition in the sense of freedom from money illusion is imposed on the demand for nominal balances by assuming that this demand is homogenous of degree one in nominal income and nominal wealth. We argue that the price level should enter into this demand as a separate argument, and that the rationality condition should require that the demand be homogenous of degree one in nominal income, nominal wealth, and the price level. Then, the symmetry issue of the real purchasing power is consequential to the structure of the neoclassical monetary growth model. |
