What are three reasons people want to hold money balances?
What will be an ideal response?
There are three reasons people hold money balances. The transactions demand for money is the demand to hold money to make regular, expected expenditures. The precautionary demand is the money held to meet unplanned expenditures and emergencies. The asset demand for money is to hold money as an asset that is a store of value.
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If a price decrease of a product significantly raises its revenues, then the absolute price elasticity of demand for that product must be
A) less than one. B) equal to one. C) greater than one. D) an example of unit elasticity.
If the Fed was to use all of its three most common tools to increase the money supply, it would:
a. buy bonds, reduce the discount rate, and reduce reserve requirements. b. sell bonds, reduce the discount rate, and reduce reserve requirements. c. sell bonds, reduce the discount rate, and increase reserve requirements. d. sell bonds, increase the discount rate, and increase reserve requirements.