What are the main influences on the quantity of real money that people and businesses plan to hold?

What will be an ideal response?

The quantity of real money demanded depends on four factors: the price level, the nominal interest rate, real GDP, and financial innovation. An increase in the price level increases the nominal demand for money but the quantity of real money demanded is independent of the price level. An increase in the nominal interest rate decreases the quantity of real money demanded, because the nominal interest rate is the opportunity cost of holding money. An increase in real GDP increases the demand for real money, because more real GDP implies more transactions and an increase in the demand for money to finance the transactions. And, financial innovations that make it less costly to get by with less money on hand decrease the demand for money.