Question: Demand for money holdings are: a.) b)positively related to the interest rate. Money supply refers to all the currency and other liquid instruments in a country's economy. 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. 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. ADVERTISEMENTS: The modem concept of demand for money is associated with the Keynesian analysis of the demand for money. d)negatively related to income. We regularly need money to pay for goods and services. 6. In his General Theory of Employment, Interest and Money (1936), J.M. And such financial transactions can be of two types – income motive and business motive. 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. c)negatively related to the interest rate. Money is a medium of exchange and this function of it’s gives rise to the transactional motive for demand for money. So the precautionary demand for money is also negatively related to interest rates. b.) Brief note on Liquidity […] As GDP is considered exogenous to the liquidity preference function, changes in GDP shift the curve. Speculative demand is inversely related to the interest rate. 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. a)positively related to income. B) positively related to both the interest rate and income. In contrast to the value of money, which is expressed in units, such as $1, $20 and $100, the price level is an aggregate. B)other things remaining the same, the higher the price of a good, the smaller is the quantity demanded. Transactions demand is positively related to real GDP. d. is independent of the interest rate, while money demand is negatively related to the interest rate. Related posts: What are the Grounds Required for the Total Demand for Money? C) positively related to the interest rate and negatively related to income. a. and money demand are positively related to the interest rate. c.) inversely related to real disposable income. b. and money demand are negatively related to the interest rate. inversely related to the interest rate. Gross domestic product (GDP) is a measurement of the … positively related to the interest rate. Keynes expounded his theory of demand for money. 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