What is the basic trade-off of the demand for money? The basic trade-off of the demand for money is to gain interest and perform fewer transaction...
What is the basic trade-off of the demand for money?
The basic trade-off of the demand for money is to gain interest and perform fewer transactions or demand more goods and services at the cost of earning less income.
As the interest rate increases, individuals have a propensity to consume less, reserving a portion of income for investment in securities, given the increase in profitability.
The demand for money for the transaction motive is directly related to income.
The demand for money for the transaction motive is inversely related to the interest rate.
The basic trade-off of the demand for money is to gain interest and perform fewer transactions or demand more goods and services at the cost of earning less income.
As the interest rate increases, individuals have a propensity to consume less, reserving a portion of income for investment in securities, given the increase in profitability.
The demand for money for the transaction motive is directly related to income.
The demand for money for the transaction motive is inversely related to the interest rate.
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The basic trade-off of the demand for money is between gaining interest and performing fewer transactions or demanding more goods and services at the cost of earning less income. As the interest rate increases, individuals tend to consume less and allocate a portion of their income to investment in securities due to the higher profitability. The demand for money for transaction purposes is directly related to income, while the demand for money for transaction purposes is inversely related to the interest rate.
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