Basic determinant of transactions demand and asset demand
Describe the basic determinant of (a) the transactions demand and (b) the asset demand for money?
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(a) The level of nominal GDP. The superior this level, the greater the amount of money demanded for transactions. (b) The interest rate. The greater the interest rate, the lesser the amount of money demanded as an asset.
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Describe the factors affecting the option of a minimum cash balance amount. The minimum cash balance amount is find out by how easy it is to increase funds when needed, how predictable the cash flows are, and how risk averse managers are.
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