In the Baumol-Tobin analysis of the demand for money,either an increase in ________ or an increase in ________ increases money demand.
A)income;interest rates
B)brokerage fees;interest rates
C)interest rates;the price level
D)brokerage fees;income

Question

Quizplus · Accepted Answer

The Baumol-Tobin model suggests that an increase in income or an increase in brokerage fees (transaction costs) increases the demand for money. Higher income increases transactions and thus the need for money, while higher brokerage fees make it more costly to convert securities into money, leading to holding more money.

In the Baumol-Tobin Analysis of the Demand for Money,either an Increase