State 4 Factors Which Affect (shift) The Demand For Money And Describe How Each One Is Correlated (positive Or Negative) With The Demand For Money.

DEMAND FOR MONEYM whatever genes affect the touchstone of capital contended by sort of a little , in the same way that many another(prenominal) factors affect the beg for goods and services (Mankiw , Principles of Economics , pp . 630 . Firstly , we fix property as the economy s specialty of exchange , so it is be commentary the most liquid asset functional and liquidity refers to the locomote with which that asset is converted into the economy s medium of exchange (Mankiw pp . 736The harbour The Principles of Economics (Mankiw pp . 736-740 ) underlines the factors that affect the quantity demand for capitalThe first factor that determines the quantity of demand for money is excite set out . The interest rate represents the opportunity price of place money . It operator that when you hold money in your wa llet instead of placing it in an income generating fund like a savings deposit or interest-bearing bond , you recede the interest that you could have take in .

Therefore , any increase in the interest rate raises the cost of holding money and reduces the quantity of money demanded . In other manner of speaking , interest rate and quantity of money demanded are negatively fitPrice level is another factor that affects quantity demand for money When prices rise , people need more money to deprave goods and services Thus , quantity demanded for money increases (or positively correlated with increase in pricesIn come . The higher a person s level of incom! e , the higher his level of spending is . This is bodied in the system of marginal propensity to spend...If you want to bewilder a right essay, order it on our website: OrderCustomPaper.com

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