How would you expect the following to affect the economy wide demand for money?
ID: 1184798 • Letter: H
Question
How would you expect the following to affect the economy wide demand for money? The demand for money represents the desire of households and businesses to hold assets in a form that can be easily exchanged for goods and services. The primary reason people hold money is because they expect to use it to buy something sometime soon. In other words, people expect to make transactions for goods or services. How much money a person holds onto should probably depend on the value of the transactions that are anticipated. (a) Competition among brokers forces down the commission change for selling holdings of bonds or stocks. (b) Grocery stores begin to accept credit cards in payment. (c) Financial investors become concerned about increased riskiness of stocks.Explanation / Answer
The demand for money represents the desire of households and businesses to hold assets in a form that can be easily exchanged for goods and services. Spendability (or liquidity) is the key aspect of money that distinguishes it from other types of assets. For this reason, the demand for money is sometimes called the demand for liquidity.
The demand for money is often broken into two distinct categories: the transactions demand and the speculative demand.
The primary reason people hold money is because they expect to use it to buy something sometime soon. In other words, people expect to make transactions for goods or services. How much money a person holds onto should probably depend on the value of the transactions that are anticipated. Thus a person on vacation might demand more money than on a typical day. Wealthier people might also demand more money because their average daily expenditures are higher than the average person
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.