Group-1(2)

Demand for Money

Refers to how much assets individuals wish to hold in the form of money as opposed to illiquid physical assets.

Liquidity Preference

The preference of individuals to hold money over other forms of assets due to its liquidity.

Medium of Exchange

One of the primary functions of money that facilitates the buying and selling of goods and services.

Store of Value

The function of money that allows it to preserve value over time.

Fisher's Quantity Theory of Money

A theory that relates the quantity of money in an economy to the level of prices of goods and services.

Cambridge Cash Balance Theory

An approach emphasizing the role of money as a store of value, reflecting the demand for cash balances.

Keynes's Liquidity Preference Theory

Proposes that the demand for money is determined by three motives: transaction, precautionary, and speculative motives.

Transactions Motive

The demand for money required to finance everyday transactions.

Precautionary Motive

The desire to hold money in case of unexpected needs or opportunities.

Speculative Motive

The demand for money held in anticipation of future changes in the price of financial assets.

Baumol-Tobin Model

A model that links transactions demand for money to the costs of holding cash versus investing in interest-earning assets.

Friedman's Restatement of Quantity Theory of Money

Revises the demand for money function to treat it as a stable function influenced by wealth and interest rates.

Cash-in-Advance Models

Models that stipulate that consumers must hold cash before making purchases, linking cash balance to consumption decisions.

Overlapping Generations Model

An economic model that depicts how different generations interact and the role of money across these generations.

Currency Substitution

The concept of substituting domestic currency with foreign currency in transactions.

Empirical Studies of Money Demand

Research focused on measuring and understanding the relationships that determine the demand for money in various economies.

Nominal Money Holdings

The amount of money held in its face value without adjusting for inflation.

Real Money Balances

Nominal money holdings adjusted for the price level, representing the purchasing power of money.

Opportunity Cost of Money Holding

The potential income that could be earned from alternative investments instead of holding cash.

Velocity of Money

The rate at which money circulates in the economy, affecting overall economic activity.

Money Supply (Ms)

The total amount of monetary assets available in an economy at a specific time.