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
Take a position on the following economic issue in the "yes" or "no" selection, support your position with economic theory and critical thinking skills. ISSUE: Should the Feder

Quantity Equation-Has this theory worked? Why or why not?

Difference between mec and mei.

Q. How to evaluate total savings? Total savings Total savings S(r) depends positively on the real interest rate Remember that total saving

state and explain two factors that cause the shifts in the balance of payments curve.


In reference to the above question, assume you know the combination of inputs that minimizes cost. What would happen to this input combination if the price of labor increased? What

Evaluate the impact of an aging population on state and local government expenditures. Suggest strategies that government should take in dealing with this situation. Justify your r

Calculating interest rates on a yearly basis If the maturity is different from one year, the interest rate is usually recalculated to a corresponding one year rate. For example

Unemployment classification Economists sometimes differentiate between different types of unemployment. There are many type of ways of classifying unemployment however the foll