The money demand function (M/P)°=L(i,Y) (MP)d real money demand,depends negatively on i is the opp.cost of holding money positively on Y higher y=more spending →so,need more money (L is used for the money demand function because money is the most liquid asset.) CHAPTER 7 Money and Inflation slide 33 CHAPTER 7 Money and Inflation slide 33 The money demand function (M/P ) d = real money demand, depends ▪ negatively on i i is the opp. cost of holding money ▪ positively on Y higher Y  more spending  so, need more money (L is used for the money demand function because money is the most liquid asset.) ( ) ( , ) M P L i Y d =