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Explain what is meant in macroeconomics by the terms money and bonds. Explain the elementary theory of demand for money and its relationship to the velocity of money.
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Explain what is meant in macroeconomics by the terms money and bonds. Explain the elementary theory of demand for money and its relationship to the velocity of money. Think of three variables other than income, prices and the interest rate, which might affect the demand for money; describe and explain what effect you think each might have on the demand for money and velocity. In Macroeconomics any financial asset is either a bond or money. A bond is a debt instrument, issued by a borrower and promising a specified stream of payments to the purchaser, usually regular interest payments plus a final repayment of principal. Bonds are exchanged on open markets including, in the absence of capital controls internationally, providing a mechanism for international capital mobility. Bonds cannot be used to pay for goods and services, their nominal value may fluctuate and they pay an explicit rate of interest. There is...
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