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Macroeconomics: velocity, demand for money, aggregate demand

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A reduction in the demand for money is the equivalent of a(n) ______ in velocity and will shift the aggregate demand curve to the _______

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Solution Summary

This solution states whether a reduction in the demand for money is the equivalent of an increase or a decrease in the velocity of money, and whether such a reduction will shift the aggregate demand curve to the left or the right.

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Macro Economics: Money and Growth

Please help with the following problem. Provide at least 200 words in the solution.

I used to think that for growth to take place, banks had to lend out more than they had (fractional reserve, credit) and that this would lead to an increase in aggregate demand and production. Apparently, however, if velocity of money increases we can also have growth. Does this mean that if the money supply never increased (credit via banks stopped altogether) that the aggregate demand and subsequent growth to meet that demand could still occur?

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