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The transactions demand for money is least likely to be a function of the price level
The transactions demand for money is least likely to be a function of the price level. interest rate. level of national income. frequency of wage and salary payments Question 13 (1 point) If the quantity of money demanded exceeds the quantity supplied the supply-of-money curve will shift to the left the demand-for-money curve will shift to the right. the interest rate will rise. the interest rate will fall.
Expert Solution
12. transaction demand for money is a function of INTEREST RATE
as interest rate goes up, people have more incentive to keep their money in banks rather than holding the money with them. thus with the increase in interest rate the demand for money goes down.
13. if the quantity of money demanded is more than money supplied, THE INTEREST RATE WOULD GO UP.
as we all know the basic law of economics that when the demand is more than the supply in the market, the price of the good goes up. In money market, the price of money demanded is interest rate. so when people demand money more than the economy can supply, the interest rate goes up. thus now people get more incentive keeping money in banks and their demand decreases till it becomes equal to the supply and equilibrium is maintained.
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