On a diagram with the interest rate on the vertical axis and the quantity of money...
On a diagram with the interest rate on the vertical axis and the quantity of money demanded on the horizontal axis, how can the total demand for money be obtained?
Select one:
A. The asset and transaction demands are unrelated and therefore cannot be added or subtracted.
B. By adding the transactions and the asset demand for money horizontally.
C. By subtracting the transactions demand from the asset demand for money vertically.
D. By adding the transactions and the asset demand for money vertically.
Please help me out here, thanks in advance
E. By subtracting the asset demand from the transactions demand for money horizontally.
Homework Answers
Answer
Option B
By adding the transactions and the asset demand for money horizontally
The demand for money is downward sloping curve and supply of money is a vertical curve where the demand for money has two parts transition and asset so the total demand for money is the sum of asset demand for money and transition demand for money horizontally as the quantity of money is on the horizontal axis.
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