Demand and supply of money
Demand For Money
Demand of money is the total amount of money which all Individuals In the economy wish to hold for Various reasons.
In other words, the demand for money refers to the desire to hold money I.e Keep one's resources in liquid form rather than spending it. The demand for money In economics is known as LIQUIDITY PREFERENCE
Supply of money
Supply of money is the total amount of money available for use in the economy at a given period of time.
The supply of money Involves the currency In the form of bank notes and coins circulating outside the banking system as well as the bank deposit in Current account, which can be withdrawn by Cheque i.e bank money.
Elementary Quantity theory of money.
The quantity theory money is defined as the relationship between the quantity of money in Circulation in an economy and the price level.
The quantity theory of money is one of theories that tries to explain what happens when there is an inbalance between the demand for money by household and firms and Supply of money to this economic units.
However, the quantity theory of money states that an Increase In the quantity of money in circulation will bring about service.
Value of money and price level.
A fall In price leads to an Increase In the value of money.
An increase In price leads to a fall In the value of money.
The value of money Is defined as the quantity of goods. and services which a given amount of money can buy. In other words, the value of money refers its purchasing power. The value of money varies with the price level, if the price level Increases, this would mean a given amount of money would buy fewer goods and services. The value of money therefore fall with an Increase In the price level.