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Demand of Money and Measures for Money Supply

Demand For Money-Why do individuals hold money? John Maynard Keynes theory people hold money or demand for money a. Transaction motive b. precautionary motive c. speculative motive.

Measures of Money Supply– Money is something measurable. Two things are considerable in measures of money and stock of money held by the public. Supply of money is the total stock of money of various forms at a particular point of time.

There are two common measures of money supply: Narrow Money (m1) and Broad Money (m2).

m1= Currency outside bank + Demand deposit of the banking system.

m2= m1 + Time deposit of the banking system.

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