Money is a medium of exchange and this function of it’s gives rise to the transactional motive for demand for money. 2) Speculative demand for money: this is the willingness to hold cash instead of securities as an asset for investment purposes. a. and money demand are positively related to the interest rate. c)negatively related to the interest rate. d)negatively related to income. d. is independent of the interest rate, while money demand is negatively related to the interest rate. b)positively related to the interest rate. The demand function for money leads to the conclusion that a rise in expected yields on different assets (R b, R e and g p) reduces the amount of money demanded by a wealth holder, and that an increase in wealth raises the demand for money. So the precautionary demand for money is also negatively related to interest rates. The theory of liquidity preference implies that the quantity of real money balances demanded is: A) negatively related to both the interest rate and income. We regularly need money to pay for goods and services. B) positively related to both the interest rate and income. As GDP is considered exogenous to the liquidity preference function, changes in GDP shift the curve. C) positively related to the interest rate and negatively related to income. positively related to the interest rate. b. and money demand are negatively related to the interest rate. Speculative demand is inversely related to the interest rate. And such financial transactions can be of two types – income motive and business motive. In contrast to the value of money, which is expressed in units, such as $1, $20 and $100, the price level is an aggregate. ADVERTISEMENTS: The modem concept of demand for money is associated with the Keynesian analysis of the demand for money. Keynes expounded his theory of demand for money. The demand for money is affected by several factors, including the level of income, interest rates, and inflation as well as uncertainty about the future. C)income D)the prices of related goods 15) 16) The law of demand states that A)a decrease in the price of a good shifts the demand curve leftward. Because it is difficult, confusing and nearly impossible to accurately average all prices for all goods and services in an economy, the price level is most commonly analyzed by finding the price of a theoretical collection of goods and services. The way in which these factors affect money demand is usually explained in terms of the three motives for demanding money: the transactions, the precautionary, and the speculative motives. Money supply refers to all the currency and other liquid instruments in a country's economy. a)positively related to income. Question: Demand for money holdings are: a.) inversely related to the interest rate. 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