True or False?
The statement is true. For each unit of additional real money stock held, the benefit will be the earnings on other assets, represented by the real rate of interest plus the expected inflation rate, that the public would be willing to give up to hold that additional unit of real money balances. This is a little strip, one unit wide, extending vertically downward from the demand for money curve to the quantity axis. Sum all these little vertical strips for each unit of real money stock held and we obtain the area under the demand curve to the left of the total quantity of real balances held. Since it costs the government virtually nothing to put additional money in circulation, all of the area under the demand for money represents benefit from holding real money balances.