It is not a theory of output, or of money income, or of the price level.” The demand for money on the part of ultimate wealth holders is formally identical with that of the demand for a consumption service. He regards the amount of real cash balances (M/P) as a commodity which is demanded because it yields services to the person who holds it. Using the theory of mental accounting (Thaler 1985; Thaler and Shefrin 1981), the authors suggest that people may perceive a large denomination of money as real money, whereas an equivalent amount in smaller denominations is seen as petty cash or loose change (Raghubir and Srivastava 2009). The neutrality of money, also called neutral money, is an economic theory stating that changes in the money supply only affect nominal variables and not real variables. In other words, the amount.

Money Is Not Real Theory Questions
Money Is Not Real Theory Book

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His trade theory held that international prices varied only in proportion to their “real” labor costs, without taking money, credit, and debt service into account. Credit payments to bankers, and the distribution of financial assets and debts, are not seen to affect the distribution of income and wealth.

Many small-business people believe that if you get the right people on the bus, they won't require external motivation. While these high performers will insist on receiving market rate compensation, they don’t require extrinsic motivation. They are driven. They couldn’t conceive of doing less than their absolute best, regardless of the circumstances.

That may be true for top performers who are well above average. Unfortunately, most of us don’t live on Lake Woebegone. In the real world, the average employee is, well, average. The fact is that the average employee does need extrinsic motivation. The notion that you can remove motivation and people will continue to work hard, because they are intrinsically motivated ignores human nature.

Related: 4 Tips to Create a Productive and Healthy Culture

In general, people will work harder if they believe there are rewards for good results and penalties for poor ones. Elite employees notwithstanding, the vast majority of companies do need to motivate their people.

Compensation is perhaps the most frequently used motivator. It works, but studies show that only the prospect of receiving money in the near future is a strong enough motivator to change behavior. Once the employee receives the money, its power to motivate ends very quickly. Some studies say within a week. Further, the same studies indicate that to truly change behavior, the amount of the incentive must be at least 10 percent of base compensation for the period.

Money is important, but we all want and need more than compensation alone. Our work indicates that people also want to be recognized, contributing members of a winning team. This means that people want to know that the enterprise with which they are involved is succeeding. They want to know that what they are doing is contributing to that success and they want these efforts to be recognized.

Take every opportunity to celebrate successes. Disingenuous hoopla won’t work and if a company is underperforming, management needs to acknowledge that reality. However, even when a business is in trouble, if it begins to move in a positive direction, the progress should be acknowledged. Celebrations communicate to employees that the company is succeeding, the first of the three things needed to motivate.

Related: 4 Ways to Reignite the Flame With Burned Out Employees

Second, employees need to understand how what they are doing is contributing to that success. How will they know this? Their manager needs to tell them. If you can’t come up with a way that an employee is contributing to the success of the company, then you should ask if you need that position or that employee.

Money Is Not Real Theory Questions

Finally, employees want their contributions to be recognized. Monetary recognition is one way. But, simply saying thank you when an employee does a job well can be powerful. Instead of speaking to employees only to correct them, catch employees doing something right and praise them. When you praise an employee, be specific about what you liked and link their behavior to a company or professional goal. A well-timed gift certificate, recognition at a company meeting, extra time off or even a sincere “job well done” will go a long way towards motivating employees.

Money Is Not Real Theory Book

Carrots are good, but our experience is that to be most effective, there needs to be some stick as well. Employees need to know that there are consequences associated with poor performance.

Yes, there are a few superstars who don’t need motivation, but most employees do. The superstars are expensive. Small businesses often can’t afford them. Therefore, small businesses need to focus on motivating their employees to get superior performance.

Related: How to Keep Good Employees From Looking for Other Jobs