Definition of Money-in-the-Utility-Function : Money-in-the-Utility-Function is a modeling idea. In a basic Arrow-Debreu general equilibrium there is no need for money because exchanges are automatic, through a 'Walrasian auctioneer'. To study monetary phenomena, a class of models was made in which money was a good that brought direct utility to the agent holding it; e.g., a utility function took the form u(x,m) where x is a vector of other commodities, and m is a scalar quantity of real money held by the agent. Using this mechanism money can have a positive price in equilibrium and monetary effects can be seen in such models. Contrast 'cash-in-advance constraint' for an alternative approach. (Econterms)

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