WebThe demand for an asset depends on both its rate of return and its opportunity cost. Typically, money holdings provide no rate of return and often depreciate in value due to inflation. The opportunity cost of holding money is the interest rate that can be earned by lending or investing one's money holdings. The speculative motive for demanding ... Webc. False: money demand affects LM, not the IS curve. d. The LM curve represents the combinations of income and the interest rate at which the money market is in equilibrium. If money demand does not depend on the interest rate, then we can write the LM equation as M/P = L(Y). For any given level of real balances M/P, there is only one level
Chapter 27.2 Flashcards by Alana Leclair Brainscape
Web1 day ago · Wall Street had a turbulent 2024, clocking in its worst year since the 2008 financial crisis while ending a three-year streak of gains. Inflation, rate hikes, and pandemic lockdowns in China ... WebThere are two situations: (i) If market rate of interest is very high and everyone expects it to fall in the future (i.e., rise in price of bond) thereby anticipating capital gain from bond … colin cowherd blazing five week 2
10.2 Demand, Supply, and Equilibrium in the Money Market
WebThe speculative demand for money thus depends on expectations about future changes in asset prices. Will this demand also be affected by present interest rates? If interest rates are low, bond prices are high. It seems likely that if bond prices are high, financial investors will become concerned that bond prices might fall. That suggests that ... WebVelocity of circulation of money means the number of times a unit of money. When the nation's money supply is Rs. 1200 billion and GDP is Rs. 4800 billion, velocity of circulation money is: If quantity of money increases 100%, other things remaining constant, value of money changes by: According to Keynes people demand money for purposes (motives): WebSo the transactions demand for money depends on three things: a) ... This is called the speculative motive. Suppose that interest rates fluctuate. At a two percent rate of interest, you would get $1,020 in a year's time in exchange for $1,000 in cash now (i.e. by buying now for $1,000 a bond that pays $1,020 in a year, which is the same thing ... colin cowherd blazing five week 5