EC223 Chapter Notes - Chapter 5: Price Level, Demand Curve, Economic Equilibrium
Document Summary
Wealth: total resources individual has (includes assets) Expected return: (return expected over next period) Risk: the degree of uncertainty with return. Liquidity: speed/ability to convert asset into cash. Theory of asset demand includes all of these factors. If the expected return for td bond"s rise and bell"s stays the same your gonna be like fuck bruh i wanna go with the one that has the higher expected return. If dc bond"s risk goes up and other"s stay the same your gonna be like yo fuck this im not going for the riskier asset less risk when dealing with money. Shit that is not liquid makes it harder to sell or harder to find a buyer quickly more liquid item makes it transaction costs lower easier to sell more desirable less costs. Increase in expected return compared to any substitute asset will result in increase in quantity demanded for assets.
