Demand for Money
Supply for money: is determined by the boc. It's avertical line because it's independent of prime rate.
Transaction demand: desire to hold money as a medium of exchange; independent of interest rates.Graphically, transaction demand for money is a vertical line equal to the quantity of money.Increase in demand for money will cause an increase in transaction demand if prices and real income goes up MD(T) will go up
Determinants of transaction demand: changes in real income, changes in price levels.

Asset Demand: desire to hold money as a store of wealth or accumulate wealth. Graphically, asset demand is downward sloping.
Determinants of asset demand: interest rates; when interest rates are high, people hold their wealth in forms other than M1 (invest in bonds, CD's, etc to get a return on their investment), when interest rates are low, people will hold their wealth as M1 (to buy goods of value).

Total demand for money; is downward slopping because assets demand for money shifts it.

Determinants of demand for money: level of transactions (real GDP), average value of transactions (price level), rate of interest.

Graphically, the demand for money is downward sloping. We add Transaction demand to Asset demand to get overall demand for money.

*All info taken from lecture notes "Monetary Policy," slides 27-29.*