The Total Demand for Money Is Equal to the Transactions

question 24

Essay

The total demand for money is equal to the transactions demand plus the asset demand for money.
(a)Assume that each dollar held for transactions purposes is spent on the average five times per year to buy final goods and services.If nominal GDP is $1,000 billion (or $1 trillion),what is the transactions demand?
(b)The table below shows the asset demand at certain rates of interest.Using your answer to part (a),complete the table to show the total demand for money at various rates of interest.

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The change in utility an individual gains from consuming an additional unit of a good or service.

Rate Of Substitution

The rate at which a consumer can replace one good with another while maintaining the same level of utility.

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