What motivates people s demand for money?

Monetary demand refers to the amount of financial assets that economic agents (such as residents, businesses, and units) are able and willing to hold in the form of money (cash or deposits) at a specific interest rate.

The motive of money:

1. Transaction motive

Trading motivation refers to the motivation that people need to hold money in order to cope with their daily commodity transactions. He divided the transaction motive into two types: the income motive and the business motive. The motivation for income mainly refers to the individual, and the motivation for business mainly refers to the enterprise.

The demand for money based on the motivation of income and the motivation of business is what Keynes called the demand for money transactions.

2. Precautionary motive

The precautionary motivation refers to the motivation of people to hold money in order to cope with unexpected needs. Keynes believed that the when, amount, and use of money kept in the hands for transactional motives could generally be determined in advance.

But life often presents some unforeseen and uncertain spending and shopping opportunities. For this reason, people also need to keep a certain amount of money in their hands, and this kind of monetary demand can be called the preventive demand of money.

3. Speculative motive

Speculative motivation refers to the motivation of people to hold money in order to satisfy the profit from speculation according to the change of market interest rate. Because currency is the most flexible liquid asset, it has turnover flexibility, and it can be held for financial speculation at any time according to changes in the market. The demand for money that arises out of this motive is called the speculative demand for money.

The demand for money due to the motive of trading, together with the demand for money due to the motive of prevention and speculation, constitutes the aggregate demand for money.

There are three motivations for people's demand for money. One is the demand for currency transactions. Trading demand refers to the demand for currencies that arises to cope with daily transactions.

It is rooted in the asynchronous nature of income and expenditure. The second is preventive demand, which refers to the demand for money in order to prevent unexpected spending. It is rooted in the uncertainty of future income and expenses.

Since the trading demand and the prevention demand of money are both functions of income, they are often referred to as trading demand. The third is the speculative demand for money, which refers to the demand for money in order to buy profitable bonds. It is rooted in the uncertainty of future interest rates and is a subtraction function of interest rates.

The demand for money is the need for all levels of society to be willing to hold property in the form of money for a certain period of time.

Factors influencing the demand for money:

1) Real income level. Generally speaking, the higher people's real income, the more money they need for daily transactions, so the level of real income affects the demand for money, which is directly proportional to the demand for money.

2) Changes in the price level. An important purpose for people to hold money is to meet daily transactions, the higher the price level, the more money is needed for daily transactions, and the more money people need.

3) Interest rates. Generally speaking, the higher the interest rate, the lower the need for people to be willing to hold property in the form of money, people always want to get more income, when the market interest rate is high, **** is low, people will be willing to exchange the currency in their hands for **, to get more income. Therefore, the market interest rate is inversely proportional to the demand for money.

4) Return on financial assets. The higher the rate of return on financial assets, the more people are willing to hold financial assets, and the demand for money decreases. Therefore, the rate of return on financial assets is inversely proportional to monetary needs.

5) The velocity of money. The velocity of money has an inverse relationship with the demand for money.

6) ** Fiscal revenue and expenditure. fiscal surplus, low demand for money; Otherwise, it is bigger.

7) Other factors: credit development status, national political situation, etc.

The demand for money is a derived demand that derives from people's demand for goods. Money is fixed acting as a general equivalent.

The specific commodity has the functions of a means of circulation, a means of payment and a means of storage, which can meet the needs of commodity production and exchange, as well as the need to hold wealth in the form of money.

Influencing factors: 1. Income level: Income status is one of the main factors determining the demand for money.

This factor can be broken down into two aspects: income level and income interval. In general, the amount of money demanded is directly proportional to the level of income, and when the income of economic agents such as residents, businesses, etc., increases, their demand for money also increases.

2. Consumption propensity: refers to the proportion of consumption expenditure in income, which can be divided into average consumption tendency and marginal consumption tendency.

Average propensity to consume refers to the proportion of total consumption to total income, while marginal propensity to consume refers to the proportion of incremental consumption to incremental income. In general, the propensity to consume coincides with the direction of changes in the demand for money.

3. Interest rate.

Horizontal: in a market economy.

, the interest rate is a regulation of economic activity.

important leverage. Under normal circumstances, interest rates rise and the demand for money decreases; The interest rate decreases, the demand for money increases, and the interest rate has a negative correlation with the demand for money.

4. The degree of development of credit: If a society has developed credit, a sound credit system, and people can easily obtain cash or loans when they need money, then the amount of money necessary for the whole society is less than that of a society with underdeveloped credit and an imperfect credit system.

The motivations of people to hold money include trading motives, prevention motives, and speculative motives.

Keynes. The current dynamic preference theory analyzes three motivations for people to hold money, namely the trading motive, the precautionary motive, and the speculative motive. The demand for money in the first two motives is the demand for the medium of exchange.

The latter is motivated by the demand for money is the demand for idle money balances and the demand for the form of assets. Keynes believed that the demand for money in a transactional nature is an increasing function of income.

Speculative demand for money, on the other hand, is a function of the decline in interest rates.

The motivations of people to hold money include trading motives, prevention motives, and speculative motives.

Keynes's liquidity preference theory analyzes the three main motivations of people to hold money: the trading motive, the precautionary motive, and the speculative motive. The first two motives for the need for money are the demand for the medium of exchange.

The latter motive of money demand is the demand for idle money balances, the demand for the form of assets, Keynes believed that the transactional demand for money is the increase function of income, while the speculative demand for money is the subtraction of interest rates.

The first is the demand for currency transactions, which refers to the demand for currency formed by households or manufacturers for the purpose of trading. It arises from the asynchronous nature of people's income and expenditure. If income and spending time are perfectly synchronized, there is no need to have idle currency on hand.

For example, people's monetary income is often obtained on a monthly, quarterly, or even annual basis, but the expenditure is constantly and continuously, which creates a demand for currency transactions.

The second is the precautionary demand for money, which refers to the demand for money formed by people to cope with accidents, which arises from the uncertainty of future income and expenditure. For example, people need to keep some money with them to cope with illness, work accidents, and other unforeseen events. The third is speculative demand, which refers to the demand for money formed by people's timely adjustment of asset structure in order to avoid asset losses or increase capital income due to the uncertainty of future interest rates.

For example, when people expect bonds** to rise, they need to buy bonds in time to make a profit when they sell them later, which creates speculative demand for money.