According to both Keynes and Friedman, the demand for money decreases with a decrease in
A) permanent income.
B) the interest rate.
C) the spread between the interest rates on bonds and money.
D) the return on bonds minus the return on money.

Question

Quizplus · Accepted Answer

Keynes and Friedman both argue that the demand for money is closely related to the level of permanent income. As permanent income decreases, individuals are likely to hold less money for transactions and precautionary purposes, leading to a decrease in the demand for money.

According to Both Keynes and Friedman, the Demand for Money