How the Factors Influencing the Demand for Money Shape Economics | Expository Essay

The Factors Influencing the Demand for Money

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Money can be defined as an asset used as a means of exchange. Money has a narrow and broad definition. Narrow definition includes checking deposits, currency in circulation, and debit card accounts while broad definition of money includes deposits of currency. Money is also a liquid asset used to pay for goods and services or used to settle down debts.

According to Murphy, (2009, 102-3), assets can be grouped into liquid assets and illiquid assets. Assets such as checking deposits, currency in circulation, savings deposits, debit card accounts, and time deposits are more liquid than assets such as loans, bonds, real estate, stocks, and other assets. The circulation of money in the economy is controlled by the central bank. In the United States, the central bank is a Federal Reserve…