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What Do Economists Mean By The Demand For Money-

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Changes in the federal funds rate usually will result in changes in both short ….The speculative demand for money is sometimes also called the asset demand for money—not a happy term, because, money being an asset, the entire demand for it is an asset demand.The impact of these factors on the demand for money is explained in terms of the three primary reasons to hold money..What you’ll learn to do: explain how the equilibrium interest rate is determined in the market for money. The money supply can include cash, coins and balances held in checking and savings accounts.

By this definition, what we typically think of as money—currency—does, in fact, fit the economic definition of money, but so do a lot of other items in the economy.Together, they represent the demand for money, which may also be called 'liquidity preference'.The Demand for Money.Elasticity of Demand.It is thus a stock demand..(Supply of money is also a stock concept.) Your demand for money is how much of your wealth you wish to hold as money at any moment in time.

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The demand curve is a representation of the correlation between the price of a good or service and the amount demanded for a period of time..A majority of economists support the Fed's choice of the interest rate as its monetary policy target, but some economists believe the Fed should concentrate on the money supply instead.When people think about what it means to "demand" something, they usually envision some sort of "but I want it" sort of scenario.The demand for money comes from the desire to hold liquid assets of which money is the only perfect example.

ADVERTISEMENTS: Demand for money means demand for holding cash.Shifts in the Demand Curve for Real Money Changes in real GDP or financial innovation changes the demand for money and shifts the demand curve for real money..Generally, the nominal demand for money increases with the level of nominal output and decreases with the nominal interest rate.A rise in the belief of the future value of the currency.Gross domestic product, or GDP, is another government statistic that is tricky to measure perfectly, but nominal GDP tends to rise with the money supply..

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However, you would have to pay this money back with interest.Money is not just meant for spending.Commodity money is a good whose value serves as the value of money..The Demand for Money.What does this mean?: "In Microeconomics, the supply and demand of money does not determine the price" Here is the direct quote taken from here: Not necessarily.This is important for things like recessions.If you do not opt-in you will not receive any emails from Nasdaq..

Friday, December 7, 2012 ...In this case, the “something” is money and its price is the interest rate.Economists are quick to point out that money in an economy can take different forms, but these different forms usually carry different levels of liquidity..A decrease in price will increase the quantity demanded of most goods.The advantage of holding money (the medium of exchange) is that it can be used to buy goods, services, and financial assets..The quantity theorists accept the empirical hypothesis that the demand for money is highly stable – even more stable than the functions like the consumption functions.


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