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Answer to Question #64061 in Other Economics for Genie

Question #64061
What are the various determinants of the demand for money according to the monetarists and what effect does each have on the money demand
Expert's answer
According to monetarists theory the demand for money, in real terms, may be expected to be a function primarily of the following variables:
1. Total wealth: the total that must be divided among various forms of assets. The higher is the wealth, the higher is demand for money.
2. The division of wealth between human and non-human forms: the conversion of human wealth into non-human wealth or the reverse by using current earnings to purchase non-human wealth or by using non-human wealth to finance the acquisition of skills.
3. The expected rates of return on money and other assets: rates of return are the counterparts of the prices of a commodity and its substitutes and complements in the theory of consumer demand. The higher are the rates, the lower is demand for money.
4. Other variables: variables other than income may affect the utility attached to the services of money which determine liquidity (tastes, preferences etc.)

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