(Money Demand)

Suppose that you never carry cash. Your employer deposits your paycheck of $1,000 per month directly into your checking account. You spend your money at a constant rate so that at the end of each month your checking account balance is zero. Why do people maintain checking accounts and have cash in their pockets, purses, wallets, desk drawers, piggy banks, coffee canswherever? In other words, why do people hold money? How does the stock of money in the economy affect your ability to find a job, get a student loan, buy a car, or pay credit card bills?