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Money, Banking, and Financial Markets
Pages 10 (2510 words)
Name Instructor Course Date Money, Banking, and Financial Markets Answer 1 In the Keynesian theory of money demand, Keynes stated that demand for money depends on interest and income. Money is held by an individual to facilitate normal transactions and to serve as a precaution for unexpected contingencies that may take place in the future…
Since demand for money varies with interest rates, velocity also changes with changes in interest rates. Demand for money also depends upon the expectations about future interest rates. In an article published in The Globe and Mail on July 31, 2013, the author, Linda Stern, suggested to ignore advice such as “Don’t take a mortgage with you in retirement”, and “Older Folks should invest more conservatively” (Stern). In support to the view “Don’t take a mortgage with you in retirement”, it is stated in the article that carrying forward mortgages over a long period of time not only increases the risk of investment but also involves a greater expenditure on the side of the loan taker. Carrying a mortgage over a long period increases its value and interest, so it is advisable not to use a large amount when paying mortgages and instead to invest that extra amount in some other investment plans which may be beneficial in the long run. Earlier payment of mortgages is related to the emotions of the loan-taker, reduces the risk and leads to savings due to lower interest payments. ...
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