Meaning Of Demand for Money

Money is a stock variable; The money stock is the quantity of money at a point of time. As an asset, money is demanded because public desires to hold it. The motive for holding money and the time period for which it is held, of course, may differ from individual to individual. A person may hold cash for spending on goods and services. 

He may also demand money for hoarding it, i.e., keeping idle cash. Demand for money in an economy is, thus, t h e sum total of money demanded by all individuals/households in that economy.

The theory of demand for money addresses itself to the following two fundamental questions:

1) Why does an individua/household want money?

2) What are the main determinants of demand for money?

Several explanations have been offered in reply to these questions, known as theories of demand for money. Let us discuss those theories now.

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