Identify and explain the two determinants of “Money Demand”

Sum of transactions and asset demand for money

Explanation:

Demand for money means the quantity of money that people want to hold while the quantity of money is available to them based on the economic situation. The transactions which the people are willing to make is a determinant to money demand. Transactions such as paying rent, buying groceries, making repair etc. holding on a part of transactions to pay for future transactions is the demand for money.

Some hold back money for the purpose of speculative increase of the value. When the interest rates of investing in assets is more that grows the value of the money held. This demand is the asset demand for money.

answer; the correct answer is (direct foreign investment);

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.