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Demand for money in the money market is _____, while in the loanable funds market to demand for money is ____.

Question

Demand for money in the money market is _____, while in the loanable funds market to demand for money is ____.

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Solution

In the money market, the demand for money is transactional. This means that people demand money for day-to-day transactions and immediate needs.

On the other hand, in the loanable funds market, the demand for money is for investment purposes. This means that businesses and individuals demand money to invest in new projects or to buy capital goods.

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