Explore BrainMass
Share

Effects of economic parameters to the demand for money

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

What would be the effect of each of the following on the money demand, M1 (with other things held equal)?
a. An increase in real GDP
b. An increase in the price level
c. A rise in the interest rate on savings accounts and treasury securities.
d. A doubling of all prices, wages, and incomes (calculate the ecact effect on the money demand.)
e. An increase in the interest rate banks pay on checking accounts.

With a graphic for each answer. Please see attached documents for help.

© BrainMass Inc. brainmass.com October 25, 2018, 4:58 am ad1c9bdddf
https://brainmass.com/economics/monetary-economics/effects-economic-parameters-demand-money-401685

Attachments

Solution Preview

Effect of each of the following on the money demand, M1 (with other things held equal)

a. An increase in real GDP
The increase in GDP, Money Demand increases.
An increase in real GDP increases the volume of expenditure, which increases the quantity of money that people plan to hold
An increase in real GDP caused by increased per capita income will ...

Solution Summary

This solution illustrates what will happen to the demand for money given a situation where there is an increase in real GDP, price level, and interest rates. A graphical presentation is attached.

$2.19
See Also This Related BrainMass Solution

How an aging populating changes the economy's aggregate demand

How do you expect an aging population will alter an economy's aggregate money demand function? Does it matter if there is simultaneous growth to the proportion of infants in the country?

View Full Posting Details