Leon Walras is considered by many as the founder of the modern theory of general economic equilibrium. Money and its valuation is an important element in his Elements of Pure Economics of 1874. Money can be defined most basically as one type of circulating capital; the other is circulating physical capital. In this short essay, both the role of money in Walras' general equilibrium and how the demand for money is determined will be treated.

Walras asserted that circulating physical capital yields utility according to its service of availability, that is, to the degree that it is readily available. Money likewise provides a service of availability as the commodity that physical capital is destined to purchase, and it yields the same amount of utility as physical capital. The service of availability that money provides and consequently its utility is, in my opinion, the essence of Walras' theory of money. Although he assigned other roles to the use of money as a medium of exchange and as an element of production for entrepreneurs, these roles are encompassed by service of availability. By yielding services of availab

To analyze the demand for money it is necessary to understand the whole system. Thus, let's begin with some essential features of the system. Physical capital held by consumers and entrepreneurs is acquired with money. Therefore, the essential concern in Walras's model of circulating capital is the supply, price, and demand of money.

In conclusion, the essence of Walras' encaisse desiree is that money yields utility by providing the service of being a temporary refuge of income between sales and purchases, when goods are to be delivered in the future. One can also understand that interest rate, which depends on the total supply of money, drives the demand for money. Although this essay dealt only briefly with the role of and demand for money and in a general equilibrium system, it has covered the basic ideas behind Walras's theory.

The equilibrium prices of all commodities in terms of money are given by the role of money as numeraire and by the workings of the entire model that determine the ratio of exchange between each commodity and the numeraire. In general equilibrium, the price of all money held by different individuals for different purposes is the same (326). Moreover, because the value productivity of physical capital is an underlying influence upon the rate of interest on money, an influence exerted through variations in the volume of funds invested, the equilibrium rate on money is the same as the equilibrium rate of net income determined in the market for capital. There is therefore equality in the rate of net income from all capital goods and real and monetary circulating capital (323).

The rarete or value of the service of money is directly proportional to its utility and inversely proportional to its quantity (329).

Similarly, money is not desired for itse

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