Demand for money - theories, Macroeconomics

The amount of wealth that households and business desire to hold in the form of money balances is called the 'demand for money'.

Individuals and firms have at their command only limited resources in the form of current income and total accumulated assets. They must make choices concerning their allocation and must constantly balance the advantage of holding more of one asset against the disadvantage of holding less of others. The theory of demand for money is one part of the theory of choice in the allocation of these resources.

Why do individuals and businesses hold money? Usually, money held yields no explicit income and by holding money instead of devoting it to some other uses one forgoes income. But, the fact that people do hold money balances suggests that holding money must yield some sort of advantage or provide some sort of service to the individual.

In all these theories, narrow definition of money (i.e. coins, paper money and demand deposits at commercial banks) is preferred and it is assumed that money yields no interest return.

 

Posted Date: 9/18/2012 4:48:24 AM | Location : United States







Related Discussions:- Demand for money - theories, Assignment Help, Ask Question on Demand for money - theories, Get Answer, Expert's Help, Demand for money - theories Discussions

Write discussion on Demand for money - theories
Your posts are moderated
Related Questions
The following is the information from the national income accounts for a hypothetical country:  GNP                                                                  Rs. 5000.00

Differentiate between Nominal rate and real interest rates To distinguish the real interest rate from the "normal" interest rate, the latter is called the nominal interest rate

Production Alternatives Type of production A B C D E Automobiles 0 2 4 6 8 Forklifts 30 27 21 12 0 If the economy is at point C, what is the (opportunity) cost of 2 more automobile

what is the impact of interest rate in consumption

How much does GDP rise in each of the following scenarios: 1. During a recession, the government raises unemploymemnt benefits by $100 million. 2. A new US airline purchases

What is Treasury bills In most countries you will find many types of government bonds. An important distinction is the duration of the bond, that is, the difference between the

explain the profit maximizing/loss minimizing rule may be applied under the 3 scenarios

The different between williams managerial discretion model and baumol''s sales maximization model

In 2010, Wonderlanders consumed 15 million liters of rum at an average price of $5 per liter. The Wonderland department of commerce has estimated that the price elasticity of the d

QXd = 14 - (1/2)PX and QXs = (1/4)PX - 1 Instructions: Round your answers to the nearest whole number. a. Determine the equilibrium price and quantity. Show the equilibrium g