UNIT 4 DISCUSSION
The demand for money is affected by three factors: Transaction, precautionary, and speculative reasons.
1) Transaction reasons: People demand money for transaction purposes because most transactions involve an exchange of money. Also, people normally demand more money when their incomes are high, or when the GDP is high. Personally, for example, I demand money for transactions such as purchasing groceries, gas, rent, and bills. Each week I have to buy groceries and fill up the tank, and that requires money. Also, each month I have to pay the rent and the bills, I have to have money available for all those transactions.
2) Precautionary reasons: The demand for money as a precautionary reason is for adverse or uncertain
The demand for money is affected by three factors: Transaction, precautionary, and speculative reasons.
1) Transaction reasons: People demand money for transaction purposes because most transactions involve an exchange of money. Also, people normally demand more money when their incomes are high, or when the GDP is high. Personally, for example, I demand money for transactions such as purchasing groceries, gas, rent, and bills. Each week I have to buy groceries and fill up the tank, and that requires money. Also, each month I have to pay the rent and the bills, I have to have money available for all those transactions.
2) Precautionary reasons: The demand for money as a precautionary reason is for adverse or uncertain