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The Demand For Money

Demand for money - Definition

The demand for money within a specified area at a given time is merely the sum of individual demand for money to hold. Peoples demand money because it serves as a medium of exchange or means of payments. Science money is commonly used for making transactions, a major element in the demand to hold money is a transactions demand. Another important function of money is to serve as a store of value.

Demand for money

Human demand money for the following reasons:

1. To fulfill their basic needs (Foods, cloths, health and education etc.)
2. To do business
3. To make value transaction
4. To develop their life style
5. To create further money
6. To do investment purpose

Demand for money – Classical view

The classical view is that money is not demanded for its own sake, because it has no direct utility for its holder. Money is demanded because it has purchasing power. As per the classical view money has no value itself, it becomes valuable when it is used for the medium of exchange. That is when we can purchase of any goods in transaction of money. In the classical view money is consider only for medium of exchange.

Demand for money – Keynesian approach

But money consider as the store of values as per the Keynesian view. According to Keynesian beside the medium of exchange, money is used for the store of value. Keynesian emphasized on the saving sector of money rather than current consumptions.
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