Theory of Money Demand and Its Impact on Wealth

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According to the text, what is the main focus of the Theory of Money Demand?

Analyzing how interest rates affect the demand for money

Determining the nominal value of aggregate income

Studying the history of money demand

Exploring the relationship between money and wealth (correct)

Which economist(s) are mentioned in the text as having conducted in-depth research on the issue of demand for money?

Fisher (1910) and Keynes (1920-1930)

Fisher (1910) and Friedman (1950)

Fisher (1910), Keynes (1920-1930), and Friedman (1950) (correct)

Keynes (1920-1930) and Friedman (1950)

According to the text, how does interest rate affect the demand for money?

Interest rate indirectly influences the quantity of money demanded (correct)

Interest rate directly determines the quantity of money demanded

Interest rate affects the demand for money only in modern theories

Interest rate has no effect on the demand for money

What does the Classical theory for money demand, Cambridge and Keynes primarily focus on?

Determining the nominal value of aggregate income Signup and view all the answers

In the context of money demand theories, what did Friedman's theory introduce?

The modern theory of money demand Signup and view all the answers

What does the text suggest about the relationship between money and wealth?

Money and wealth are different concepts, which may influence the Demand for Money Signup and view all the answers

According to the Quantity Theory of Money, what happens when the quantity of money (M) doubles?

Velocity (V) doubles and price level (P) doubles Signup and view all the answers

What influences the velocity of money according to Fisher's view?

Institutional and technological features of the economy Signup and view all the answers

What is the equation representing the Quantity Theory of Money Demand?

M = (1/V) PY Signup and view all the answers

What determines the demand for money according to Keynes's Liquidity Preference Theory?

Wealth and precautionary motive Signup and view all the answers

Cambridge's Theory of Demand Money suggests that the demand for money is influenced by:

Wealth and store of value Signup and view all the answers

What does the equation MV = PY represent?

Average number of times per year that a unit of money is spent in buying goods and services Signup and view all the answers

According to Fisher's view, what affects the velocity of money?

Institutions in the economy and technological features Signup and view all the answers

What is the primary function of money according to Cambridge's Theory of Demand Money?

Medium of exchange for transactions Signup and view all the answers

According to the text, what is the relationship between income and speculative motive (DMs)?

Inverse relationship Signup and view all the answers

In the context of the text, what influences the existence of speculative motive (DMs)?

The relationship with relative asset rate of return Signup and view all the answers

What does the liquidity preference function Md/ P = f (i, Y) represent according to the text?

The demand for real money balances in relation to interest rate and income Signup and view all the answers

What is the impact of a rise in interest rate on the quantity of money, according to the text?

Quantity of money decreases Signup and view all the answers

According to Friedman’s Modern Quantity Theory of Money, what is rb in the context of money demand?

The expected return on bonds Signup and view all the answers

What did Friedman view as more important than current income in determining money demand?

Permanent income Signup and view all the answers

What distinguishes Friedman's money demand function from Keynes' according to the text?

Friedman's function is more stable than Keynes' Signup and view all the answers

In Friedman's model, what impact do changes in interest rates have on money demand?

Little to no impact Signup and view all the answers

What is influenced by the services provided by the bank and interest payment on money balances according to the text?

Expected return on money Signup and view all the answers

According to the text, what causes instability in velocity?

Interest rate fluctuations Signup and view all the answers

In the context of the text, what is the relationship between velocity and interest rate?

Positive relationship Signup and view all the answers