Both the precautionary and asset demand for money are influenced by

Question

Quizplus · Accepted Answer

The interest rate influences both the precautionary and asset demand for money. The precautionary demand for money increases as interest rates rise, as individuals and firms may want to hold more liquid assets in case of unexpected expenses or economic downturns. The asset demand for money also increases as interest rates rise, as other assets with higher yields become relatively less attractive. The U.S. Treasury and gold prices may impact the demand and supply of money, but they do not directly influence the precautionary and asset demand for money.

Both the Precautionary and Asset Demand for Money Are Influenced