DEMAND FOR MONEY AND IT’S SCARCITY

DEMAND FOR MONEY

Definition: The demand for money is the total  amount of money which all individuals in the economy wish, for various reasons, to hold.

 In other words, the demand for money refers to the desire to hold money; that is, keep one’s  resources in liquid form rather than spending it. The demand for money in economics is known liquidity preference.

MONEY: DEMAND FOR AND SUPPLY OF MONEY

  • Identify the various motives for holding wealth in the form of money
  • Explain the elementary quantity theory of money
  • Identify the determinants of the supply of money

Explain how changes in the price level affect the purchasing power of money

REASONS OR MOTIVES FOR HOLDING MONEY WHEN THE DEMAND IS THERE

Lord Keynes postulated that there are three motives or reasons responsible for the demand money or to hold money.

 These are:

  • Transactional motives: People desire to keep or hold money for day to day transactions or current expenditures. Household needs to hold money in order to cater for the interval between the receipt of incomes and their expenditures.

  • Precautionary motives: This when people demand for money in order meet up with unforeseen circumstance.oes or unexpected expenditures. These may include sickness, unexpected visitors, etc. Due to uncertainties in life, people keep money against future emergencies that may require monetary expenditures.

meaning of economics

  • Speculative motives: This motive is specifically a business motive and refers to the desire to hold cash balance in order to embark on speculative dealings in the bond market. The demand to hold money for specific purpose is elastic.
  1. economic tools for nation building
  2. budgeting
  3. factors affecting the expansion of industries
  4. mineral resources and the mining industries
  5. demand and supply
  6. types of demand curve and used
  7. advertising industry
  8. factors of production
  9. entrepreneur
  10. joint stock company
  11. public enterprises
  12. private enterprises
  13. limited liability companies
  14. migration
  15. population
  16. market concept
  17. money market
  18. shares
  19. how companies raises funds for expansion
  20.  

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