Demand for Money
1. Transaction demand: Desire to hold money as a medium of exchange.
Determinats of transaction demand: changes in real income; changes in price level.
2. Asset demand: Desire to hold money as a store of wealth.
If interest rate are high, people will hold their wealth in forms other than money(m1); if interest rates are low, people will hold their wealth in money.(m1)
Dr. Stephanie Powers, “ Monetary Policy” slide 43 (ECON 101) at Red Deer College, March 21, 2012

  • Asset demand – the desire to hold money as a store of wealth
    • If interest rates are high, people will hold their wealth in forms other than money (M1)
    • If interest rates are low, people will hold their wealth in money (M1)
    • Demand determinants
      • Level of transactions (Real GDP)
      • Average value of transactions (price level)
      • Rate of interest
      • Transactions Demand for Money – the desire of people to hold money as a medium of exchange, that is, to effect transactions
      • Asset Demand for Money – the desire by people to use money as a store of wealth, that is, to hold money as an asset
Reference: John Sayre and Alan Morris. Principles of Macroeconomics. McGraw-Hill Ryerson. Toronto, Ontario, 2012. Dr. Stephanie Powers, “Monetary Policy”, (class notes, PowerPoint presentation slides, accessed April 16, 2012

Demand for Money
inflation is caused by 4 factors for the most part, Money supply increase, supply of goods decreases,Money demand increases, demand for goods increases..
Money includes things like paper currency(coins and notes), travellers checks, and checking and savings accounts. It doesn't include things like stocks and bonds, gic's ,mutual funds, term deposits or treasury bills or forms of wealth like homes, paintings, and cars. and in the demand for money we are talking about; the stock of money. not about income.
money maintains a reasonable stable value unlike stocks and bonds which makes it less of a risk
Reference: John Sayre and Alan Morris. Principles of Macroeconomics. McGraw-Hill Ryerson. Toronto, Ontario, 2012.