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Money supply refers to all the currency and other liquid instruments in a country's economy. And such financial transactions can be of two types – income motive and business motive. Related posts: What are the Grounds Required for the Total Demand for Money? In contrast to the value of money, which is expressed in units, such as $1, $20 and $100, the price level is an aggregate. b)positively related to the interest rate. c. is negatively related to the interest rate while money demand is positively related to the interest rate. Keynes expounded his theory of demand for money. B)other things remaining the same, the higher the price of a good, the smaller is the quantity demanded. d. is independent of the interest rate, while money demand is negatively related to the interest rate. Gross domestic product (GDP) is a measurement of the … The demand function for money leads to the conclusion that a rise in expected yields on different assets (R b, R e and g p) reduces the amount of money demanded by a wealth holder, and that an increase in wealth raises the demand for money. Question: Demand for money holdings are: a.) positively related to the interest rate. The demand for money is affected by several factors, including the level of income, interest rates, and inflation as well as uncertainty about the future. C)income D)the prices of related goods 15) 16) The law of demand states that A)a decrease in the price of a good shifts the demand curve leftward. So the precautionary demand for money is also negatively related to interest rates. C) positively related to the interest rate and negatively related to income. B) positively related to both the interest rate and income. b.) As GDP is considered exogenous to the liquidity preference function, changes in GDP shift the curve. Brief note on Liquidity […] inversely related to the interest rate. The theory of liquidity preference implies that the quantity of real money balances demanded is: A) negatively related to both the interest rate and income. In his General Theory of Employment, Interest and Money (1936), J.M. Transactions demand is positively related to real GDP. 2) Speculative demand for money: this is the willingness to hold cash instead of securities as an asset for investment purposes. I know it cannot be B, but I don't really understand help please. a)positively related to income. The way in which these factors affect money demand is usually explained in terms of the three motives for demanding money: the transactions, the precautionary, and the speculative motives. We regularly need money to pay for goods and services. Speculative demand is inversely related to the interest rate. d)negatively related to income. c)negatively related to the interest rate. 6. Money is a medium of exchange and this function of it’s gives rise to the transactional motive for demand for money. b. and money demand are negatively related to the interest rate. a. and money demand are positively related to the interest rate. ADVERTISEMENTS: The modem concept of demand for money is associated with the Keynesian analysis of the demand for money. Because it is difficult, confusing and nearly impossible to accurately average all prices for all goods and services in an economy, the price level is most commonly analyzed by finding the price of a theoretical collection of goods and services. c.) inversely related to real disposable income.

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