Aggregating the Money Demand Function:

As noted earlier the transactionary and precautionary demand for money depends on the level of Y.  Moreover, this relationship is proportional one, given by the proportionality factor, k.  We can, now aggregate the demand for money which is given by

M^d = k.(P.Y) + L(i)

i.e. the demand for money has two components - one depending on the level of nominal income and the other on the rate of interest.