In an economy, the transaction demand for money can be represented in which of the following forms? (Where T is the total value of transactions (monetary) in the economy within a unit time period, and k is a positive fraction.)

Correct option is A

The correct answer is (a) MTd = k T.
In economics, the transaction demand for money is often represented as a function of the total value of transactions within a given period. According to this relationship:
· MTd represents the demand for money due to transactions.
· T represents the total monetary value of transactions within a unit time period.
· k is a positive fraction indicating the proportion of transactions held as cash.
Thus, the transaction demand for money can be expressed as MTd = k T, meaning the transaction demand is directly proportional to the total value of transactions. Here, the constant k adjusts the scale, showing how much of the transaction value is demanded in cash form.
Information Booster: ● Transaction demand refers to the demand for money needed for day-to-day purchases. ● It is one of the components of total money demand in an economy. ● This demand is positively related to the total transaction volume. ● Higher transaction volumes lead to higher demand for transaction money. ● The parameter k can vary across economies based on factors like spending habits and payment methods.