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Demand for money
The demand for money is a more difficult concept than the demand for goods and services. It refers to the desire to hold one's assets as money rather than as income-earning assets (or stocks).
Holding money therefore involves a loss of the interest it might otherwise have earned. There are two schools of thought to explain the demand for money, namely the Keynesian Theory and the Monetarist Theory.
The demand for money and saving
The demand for money and saving are quite different things. Saving is simply that part of income which is not spent. It adds to a person's wealth. Liquidity preference is concerned with the form in which that wealth is held. The motives for liquidity preference explain why there is desire to hold some wealth in the form of cash rather than in goods affording utility or in securities.
Broader the range of other uses of a commodity, higher the price elasticity of its demand intended for the fall in price though less elastic for the increase in price. As price of
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Demand Function for Money In the Keynesian analysis , the demand for money is a function of the level of income and the rate of interest. According to Milton Friedman, the dema
Point elasticity The point elasticity of demand is described as the proportionate change in quantity demanded in response to a very small proportionate change in price. The con
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