The ________ sensitive is the demand for money to interest rates, the more unpredictable velocity will be, and the link between the money supply and aggregate spending will be________ clear.

In monetary economics, the demand for money is the amount of money people want to hold in the form of cash or bank deposits. It can also refer to the demand for money in the broader sense of M2 or M3. The demand for money is a linear function that is positive in income and negative in interest rate. Some factors that can lead to a shift in the demand for money include: Real GDP, The price level, Economic expectations, Transfer costs, and Preferences.  The demand for money is different from both income and wealth.  There are three main reasons to hold money: Transactions: People need money... Show more

In monetary economics, the demand for money is the amount of money people want to hold in the form of cash or bank deposits. It can also refer to the demand for money in the broader sense of M2 or M3.
The demand for money is a linear function that is positive in income and negative in interest rate. Some factors that can lead to a shift in the demand for money include: Real GDP, The price level, Economic expectations, Transfer costs, and Preferences. 

The demand for money is different from both income and wealth. 

There are three main reasons to hold money:
Transactions: People need money to pay bills and finance their discretionary consumption.
Precautionary: People hold money to moderate the impact of unexpected spending needs.
Speculative: People hold money to take advantage of speculative opportunities or to offset risks in other assets or the economy.
 
The demand for money as a store of value increases during times of economic uncertainty. 

Related Test: Money, Banking, and Financial Markets Practice Test: The Money Supply Process

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