The transactions demand for money will increase when

Question

Quizplus · Accepted Answer

Transactions demand for money refers to the amount of money people hold to make regular purchases. When nominal GDP increases, there is an increase in the volume of transactions, which leads to an increase in the demand for money. A fall in price level may reduce the demand for money, as people need less money to buy the same goods and services. The rate of interest is related to the opportunity cost of holding money, so an increase in the interest rate may lead to a decrease in the demand for money. Lastly, a decrease in nominal GDP may decrease the demand for money, as there are fewer transactions in the economy.

The Transactions Demand for Money Will Increase When