Why is demand for money relevant in a modern economy?
A) because the primary payment for purchases is made by cash
B) because demand deposits are included in M1+
C) because credit cards are included in M1+
D) because all accounts must eventually be settled with money

Question

Why is demand for money relevant in a modern economy?  
A) because the primary payment for purchases is made by cash 
B) because demand deposits are included in M1+ 
C) because credit cards are included in M1+ 
D) because all accounts must eventually be settled with money

Quizplus · Accepted Answer

Demand for money is relevant because in modern economies, all accounts must eventually be settled with money. This includes purchases made with cash, demand deposits, and credit cards, all of which count towards the money supply. As individuals and firms engage in economic activity, they will have a demand for money to settle their transactions and pay their bills. This is important for ensuring that the economy runs smoothly and that there is enough liquidity to meet the demands of consumers and businesses.

Why Is Demand for Money Relevant in a Modern Economy