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

A sudden decrease in the growth rate of GDP will cause a change in: A. planned investment spending. B. unplanned investment spending. C. both planned and unplanned investment spend

The Neoclassical thinking that assumes that all firms are established with the intention of making profit has been challenged by the managerial discretion models. How successful ha

The price of gasoline has recently come down as has the quantity. Show graphically and explain what might have caused this.

what happened to the equilibrium price level in Japan during the early 2000s? How did Japan''s equilibrium price level adjust between the middle of 2008 and early 2010?

We will continue with the familiar demand curve homework the previous section Let the market demand for goods be with a linear curve:    (p =A q D /10), where it is known

Consumption = $3 trillion, Investment spending =$2 trillion, Government purchases = $2 trillion, net exports via the ROW is $0 trillion. 1. What is the best estimate of real GDP

A group has chartered a bus to Atlanta. The driver costs $200, the bus costs $500, and parking in Atlanta will be $90. You have already paid $700 to reserve the bus and a driver. T

Consider a market where supply and demand are given by QXS = -18 + PX and QXd = 90 - 2PX. Suppose the government imposes a price floor of $41, and agrees to purchase any and all un

Many developing countries have suffered banking crises in which depositors lost part or all of their deposits (in some countries there is no deposit insurance). This type of crisis