The demand for money is based on

Question

Quizplus · Accepted Answer

The demand for money is typically broken down into three components: transactions demand (to make purchases and conduct daily transactions), asset demand (to hold as a store of value), and precautionary demand (to hold as a buffer against unexpected expenses or income fluctuations). These three components together make up the overall demand for money. Option B is incorrect as it does not capture the different reasons why people hold money. Option C is incorrect as it mixes up the demand for money with investment in other assets. Option D is partly correct, as liquidity is one reason for holding money, but wealth is not typically part of the demand for money equation.

The Demand for Money Is Based on