What is the demand for money?
money demand is an economic concept that theorizes that individuals prefer to keep money over other investment conditions such as stocks or bonds. British economist John Maynard Keynes has developed three motifs associated with the theory: transactions, speculation and preventive. While Keynes believed that these elements were to create demand for money, monetarist economists believe that the return rate on money is aimed at demanding more influence. This money is the consumption party of the economy, where individuals must have money derived from the income flow to pay for food, shelter, clothing and other basic needs, not to mention the discretion income for the necessary items. The speculative motif allows individuals to maintain income if the asset prices begin to decline in the economy. Through this price, individuals can buy multiple goods or buying ticket items earlier. Prevention motifs lead to saving money in case of not awaitVarious future money expenditures such as health emergency situations or main repairs of houses or cars. This economic study focuses more on the summary impact of supply and demand in terms of money. Through their theory, government interactions are an essential force that manages the economic transactions of individuals and enterprises.
When the demand for money increases, nations must increase the offer to match this demand. Most nations use a central bank or other government agency to help control the offer of money. This agency is essential because a country that continues to print money to satisfy demand will have an uncontrollable inflation that is classically defined as too many dollars that chase too little goods. The most common way of controlling Money Supply is using interest rates charged to banks. Reducing Measures will tend to increase cash supplyIt will reduce the offer when raising rates.
alternative theory for money demand states that the rate of return on invested capital dictates demand and is that individuals who make money will want to earn more. This creates an increase in the demand for money and also forces individuals to take into account the costs of the opportunity, which is the value given up in the selection of one investment over another. In order for individuals to gain the highest payback rate, they must be reasonable when choosing investments. This promotes money demand because good investment opportunities create significant short -term demand so that individuals can maximize investment income.