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Economics

Explain about the short term and long term interest rate in money demand.

The Opportunity Cost of Holding Money Demand:

a. Short-term interest rates

Rates onto assets which come due in less than six-months.

These rates tend to shift together due to basic supply and demand. What is the reason? Investors will shift their money out of any short-term financial asset which offers a lower than average interest rate.

b. Long-term interest rates

Rates onto assets which come due into more than six-months.

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Macroeconomics, Economics

Category:- Macroeconomics
Reference No.:- M9581612

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