The Demand for Money Like Inflation Leading - Essay Example

The following table reflects my financial structure:AssetsNon-financial assetsApartment - $ 223,500Honda Accord Midsize Car - $ 21,233Jewelry - $ 27,244Non-money financial assetsCopyright since I am author of 3 booksMoneyM1Bank deposits - $ 12,000Cash in hand - $ 10,000M2Fixed deposits - $ 500,000Mutual fundsIncomeEarningsAnnual salary from office where I work as IT project manager - $ 79,000Transfer paymentsBabysitting charges - $ 9 per hour for one childWhat financial institutions do you employ?

I keep my savings in JP Morgan Chase & Co. I find the bank extremely reliable and the staff very amicable and helpful. Depositing money and withdrawal of money can be done conveniently since the staff is always eager to provide their services. Moreover I stay in New York where the bank has its headquarters.I also have equity shares and for trading purpose I use the brokerage firm ‘Fidelity Investments’. I have chosen this firm after strong recommendations from several of my friends and colleagues.

The firm is completely reliable for making equity trades. They charge reasonable commissions and fees which suit my need. This brokerage firm which is based in the city of Boston ranks in the “top five in nine out of 12 categories including equity trading tools, research tools and customer service”. The customer service is extremely good, and its research tools help me to make comparisons of four stocks at a time using up to 147 different traits. Since I am an online customer, I get facilities like a quarter of my mutual funds and 6 percent of my equity trade is free of commission.

I use Allied Insurance for my personal insurance. I find the premium easily affordable. I have insured my car with American Automobile Association for its lucrative premium.Discuss your own Demand for Money. What is the price of money? Have you ever considered this price before?According to the British economist John Maynard Keynes, the demand for money can be studied both from transaction and asset approach. The demand for money which is also termed as liquidity preference theory has been classified according to three motives of people – a transactions motive, a precautionary motive, and a speculative motive (Serletis, 94).

With regard to transactions motive I need almost 45 percent of my salary for regular transactions like food, clothes, water, entertainment, shopping, electricity and other bills and charges like phone bills etc. As for my precautionary motive, I set aside around 20 percent of my salary for uncertain and unexpected expenses like sudden accidents causing huge medical bills or car repairing expenses etc.What are the factors which shift a demand for money function?Several factors shifts the demand for money like inflation leading to increased cost of necessary goods like food, clothes, house rent etc.

My demand for money increases when there is increase in food price and other bills and charges.Using your own average monthly income and your average demand for money, compute your velocity of circulation.I have low velocity of circulation which means I have more money than I normally spend. This is because I have the habit of keeping aside some portion of my salary as precautions like sudden emergencies. Since such events do not happen in most months, therefore I can keep my velocity of circulation low.

Computation: Avg. demand for money / Avg. monthly income$ 4,280 / $ 6,583 = 0.65ReferenceSerletis, Apostolos. The Demand for Money: Theoretical and Empirical Approaches, Springer Science & Business Media, 2007