Money Demand

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Last updated 7:41 AM on 4/25/26
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9 Terms

1
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Demand for Money

The desire of households and businesses to keep their wealth in a liquid form for easy and quick exchange for goods and services.

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Demand for Liquidity

An alternative name for the Demand for Money.

3
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Transactions Motive

The reason we hold money for the convenience of buying necessary goods and services.

4
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Precautionary Motive

The reason we keep money aside to prepare for unexpected contingencies or emergencies.

5
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Speculative/Asset Motive

The reason we hold money to take advantage of market opportunities for investment.

6
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Determinants of Demand for Money

Factors like income, inflation, and market conditions that influence how much money people demand.

7
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Income (GDP/Wages)

As income rises, the demand for money increases due to higher spending (Transactions) and saving for emergencies (Precautionary).

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Inflation

High inflation can lower the real value of money, affecting the desire to hold money.

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Market Conditions

Positive market performance and growing economies encourage holding more liquid assets for speculation.