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The Demand for Money

幫考網校2020-08-06 09:00:28
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The demand for money refers to the amount of money that individuals and businesses are willing to hold in their wallets, bank accounts, or other financial instruments at any given time. This demand is influenced by several factors, including:

1. Interest rates: When interest rates are high, people tend to hold less money because they can earn more by investing in other assets. Conversely, when interest rates are low, people tend to hold more money because there is little incentive to invest in other assets.

2. Income: As people's income increases, their demand for money also tends to increase, as they have more money available to spend and save.

3. Price level: When the price level rises, people tend to hold more money to account for the increased cost of goods and services.

4. Transaction costs: The cost of using financial instruments, such as credit cards or checks, can influence the demand for money. If transaction costs are high, people may prefer to hold more cash.

5. Confidence in the economy: If people are confident in the economy, they may be more willing to spend and invest, which can lead to a lower demand for money. Conversely, if people are uncertain about the economy, they may hold more money as a precautionary measure.
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