Demand for money: The desire to hold money in liquid form, driven by transaction demand, precautionary demand, and speculative demand; inversely related to the nominal interest rate.
How to apply it: Explain why higher interest rates increase the opportunity cost of holding money, reducing the quantity of money demanded.
Course: AP Macroeconomics · Unit: Financial Sector
Practice questions about Demand for money on AimFive — get rubric-based feedback showing exactly which points you earned.
AP and Advanced Placement are trademarks of College Board. AimFive is not affiliated with or endorsed by College Board.