OPEN-MARKET OPERATIONS AND THE MEDIUM OF EXCHANGE.

The article focuses on open-market operations and exchange mediums. It states that macroeconomic analysis often show that open-market operations involving an increase of money at the expense of government securities will have an expansionary effect on the economy. It examines James Tobin's argument that with a fixed nominal rate of return on securities and a variable nominal rate of return on money, the government would have to purchase money with securities to produce an expansion. It states that Tobin is incorrect when he claims that money's essential characteristic is the fixity of its rate of return.