The demand for money (M2) remained relatively stable from the 1960s through the early 1990s since, over this time period,

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Quizplus · Accepted Answer

The stability of the demand for money (M2) over the period from the 1960s through the early 1990s can be attributed to the fact that the opportunity cost of holding M2 assets did not change significantly. This means that the return on alternative investment options did not increase significantly, and as a result, people did not feel the need to switch from holding money to investing in other assets. The income elasticity of demand for M2 is not relevant as it does not explain the stability of demand. Similarly, the interest rates on money market instruments and the stability of the money demand function for M1 are not directly related to the stability of M2 demand.

The Demand for Money (M2) Remained Relatively Stable from the 1960s