<blockquote>
<p>Does L mean liquidity? Or does it simply mean that the LHS depends on i and Y?</p>
</blockquote>
<p><span class="math-container">$L$</span> means simply that the money demand depends on <span class="math-container">$i$</span> and <span class="math-container">$Y$</span>. You could have written <span class="math-container">$f(i, Y)$</span> or <span class="math-container">$\gamma (i, Y)$</span> or what you prefer, it's the same, from an analytical point of view.</p>
<p>However, it is usual to write <span class="math-container">$L$</span> for mnemonic purposes or to make clearer, at first sight, what the symbol refers to from an economic point of view, that is the money demand function. As you write <span class="math-container">$I$</span> for investment or <span class="math-container">$C$</span> for consumption, and don't write, say, <span class="math-container">$Z$</span> for investment or <span class="math-container">$\eta$</span> for consumption.</p>
<p>Obviously, the letter <span class="math-container">$L$</span> is borrowed from 'Liquidity'.</p>

CC BY-SA 4.0
2022-09-20T11:23:00.603Z
2022-09-20T11:23:00.603Z
BakerStreet
<p>(M/P)^d=L(i,Y)</p>
<p>M=Money supply</p>
<p>P=Price</p>
<p>d=Demand</p>
<p>i=Nominal interest rate</p>
<p>Y=?Output</p>
<p>Does L mean liquidity? Or does it simply mean that the LHS depends on i and Y?</p>
<p>Thank you!</p>

CC BY-SA 4.0
2022-09-19T08:54:39.460Z
Why ask something on Econ StackExchange that you can google in 5 seconds?
VARulle
CC BY-SA 4.0
2022-09-19T09:22:42.753Z
@VARulle This is a personal quirk, but I don't like "Google is your friend" type responses unless they link to a Google query with specific search words. I too was once a beginner, who did not know what a powerful tool Google was, how to choose good keywords, or (not relevant for this case) that subpages like scholar.google.com existed. Hypocrisy disclaimer: I probably post similar responses every now and then.
Giskard
CC BY-SA 4.0
2022-09-19T09:24:53.180Z
@VARulle Also, OP seems confused and asking for confirmation, which sometimes you can't get from Google because it also throws up lower quality pages like Investopedia, so sometimes you read two seemingly contradictory explanations. This is especially irksome if you are not proficient in English.
Giskard
CC BY-SA 4.0
2022-09-19T10:29:55.563Z
@Giskard: In general I agree with this, but in the current case even just googling the title question gives you 5 correct answers on the first page, so I'm not sure how serious the question really is.
VARulle
CC BY-SA 4.0
2022-09-20T08:14:54.797Z
Which one is correct please: "Does L mean liquidity? Or does it simply mean that the LHS depends on i and Y?" Thank you!!
povt
<macroeconomics><mathematical-economics><financial-economics>
What does L mean in the money demand equation?
povt
# What does L mean in the money demand equation?

(Asked by: username_0 on 2022-09-19)

(M/P)^d=L(i,Y)

M=Money supply

P=Price

d=Demand

i=Nominal interest rate

Y=?Output

Does L mean liquidity? Or does it simply mean that the LHS depends on i and Y?

Thank you!

**Tags:** macroeconomics, mathematical-economics, financial-economics
> **Comments:**
> **username_1**: Why ask something on Econ StackExchange that you can google in 5 seconds?  
> **username_2**: @VARulle This is a personal quirk, but I don't like "Google is your friend" type responses unless they link to a Google query with specific search words. I too was once a beginner, who did not know what a powerful tool Google was, how to choose good keywords, or (not relevant for this case) that subpages like scholar.google.com existed. Hypocrisy disclaimer: I probably post similar responses every now and then.  
> **username_2**: @VARulle Also, OP seems confused and asking for confirmation, which sometimes you can't get from Google because it also throws up lower quality pages like Investopedia, so sometimes you read two seemingly contradictory explanations. This is especially irksome if you are not proficient in English.  
> **username_1**: @Giskard: In general I agree with this, but in the current case even just googling the title question gives you 5 correct answers on the first page, so I'm not sure how serious the question really is.  
> **username_0**: Which one is correct please: "Does L mean liquidity? Or does it simply mean that the LHS depends on i and Y?" Thank you!!  

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## 1 answers

### Answer by username_3 on 2022-09-20. Score: 1

> Does L mean liquidity? Or does it simply mean that the LHS depends on i and Y?

$L$ means simply that the money demand depends on $i$ and $Y$. You could have written $f(i, Y)$ or $\gamma (i, Y)$ or what you prefer, it's the same, from an analytical point of view.

However, it is usual to write $L$ for mnemonic purposes or to make clearer, at first sight, what the symbol refers to from an economic point of view, that is the money demand function. As you write $I$ for investment or $C$ for consumption, and don't write, say, $Z$ for investment or $\eta$ for consumption.

Obviously, the letter $L$ is borrowed from 'Liquidity'.


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