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Demand of Money

I need help in determining whether each of the following would lead to an increase, a decrease, or no change in the quantity of money people wish to hold. Also determine whether there is a shift of the money demand curve or a movement along a given money demand curve.

a. A decrease in the price level
b. An increase in real output
c. An improvement in money's ability to act as a store of value
d. An increase in the market interest rate

Solution Preview

I need help in determining whether each of the following would lead to an increase, a decrease, or no change in the quantity of money people wish to hold. Also determine whether there is a shift of the money demand curve or a movement along a given money demand curve.

Supply and demand curves shows how the quantity demanded or supplied changes in response to a change in the interest rate. The demand for money intersects with the money supply to determine the interest rate. (Wikipedia) Demand curves slope downward. Movements along a demand curve are induced by change in the interest rate. . The law of demand states that as the interest rate goes up, the ...

Solution Summary

Increase in real output is examined.

$2.19