Overview
Money demand and interest rates are fundamental concepts in economics that describe how individuals and businesses manage their finances. Money demand reflects the desire to hold cash or liquid assets, influenced by various factors such as income levels and economic stability. Interest rates, on the...
Key Terms
Example: During uncertain times, people may prefer liquidity.
Example: A higher interest rate makes loans more expensive.
Example: People keep cash for groceries and bills.
Example: Investors may hold cash to buy stocks at lower prices.
Example: Central banks control the money supply to influence the economy.
Example: High inflation reduces the purchasing power of money.
Related Topics
Key Concepts
Liquidity PreferenceInterest Rate EffectTransaction MotiveSpeculative Motive