Purchase Solution

Changes in aggregate demand

Not what you're looking for?

Ask Custom Question

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?

Purchase this Solution
Solution Summary

The solution does a great job of explaining the concept of aggregate demand and the impact of aging population on the aggregate demand. The response explains the concepts very well and in detail. It is ideal for students looking to get a detailed understanding of the topic. Overall, an excellent response.

Solution Preview

We can state that money demand is directly proportional to Nominal GDP, and inversely related to market interest rates and yields on different financial assets. Thus economic performance in the real sector (changes in income) or activity in financial markets (buying and selling of stocks, bonds, and related financial instruments) can affect the demand for money/cash balances. The aggregate money demand function is:
Md = [k - v*i]PY.
Md is money demand in dollars.
P is the price level.
Y is real GDP.
So PY is nominal GDP.
i is the nominal interest rate.
Here k is a constant (i.e., a parameter) that indicates how an increase in nominal GDP will affect money demand. This represents the transactions motive for holding money: the more money people are making, the more money they ...

Purchase this Solution
Free BrainMass Quizzes
Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

View More Free Quizzes
Related BrainMass Solutions

  • AD/AS as a framework for fiscal and monetary policies

    Identify and describe changes in the AS-AD graph above that would result from the implementation of an easy monetary policy. See attachment. Aggregate Supply and Aggregate Demand A.

  • Money and Aggregate demand

    The demand for money becomes more sensitive to changes in the interest rate. 14. a. It will have less impact on aggregate demand as investment demand will change in less proportion than change in open market operations. b.

  • Effects of Changes in Nominal Money Supply and Price Levels

    336284 Nominal money supply and changes in price levels affect the aggregate demand curve in different ways.

  • aggregate output and the price level

    266954 Economics Determine whether each of the following would cause a shift of the aggregate demand curve, a shift of the aggregate supply curve, neither, or both? Which curve shifts, and in which direction?

  • Shifts of Aggregate Demand Curve on Potential Output

    Shifts in aggregate demand have NO impact on potential output. Remember potential output is a measure of an economy's capacity to produce: changes in demand will not change that capacity.

  • Demand for money

    589579 Demand for money 1. Explain how an active policy differs from a passive policy. 2. Explain why the Fed can attempt to target either changes in the money supply or changes in interest rates, but not both. 3.

  • the level of real GDP demanded

    Determine the size and direction of any shifts in the aggregate expenditure line, the level of real GDP demanded, and the aggregate demand curve for each of the following changes in autonomous spending.

  • Macro Economics: Money and Growth

    Even though an increase in money supply is a much stronger factor in increasing affecting aggregate demand, increase in velocity can also cause increase in aggregate demand in a situation where money supply is not increased.

  • Shifts in the Aggregate Demand and Supply Curves

    130247 Shifts in the Aggregate Demand and Supply Curves Determine whether each of the following would cause a shift of the aggregate demand curve, the aggregate supply curve, neither, or both.

  • Aggregate demand / aggregate supply

    Total spending changes, and therefore the aggregate demand curve shifts, when something happens to change consumption, investment, government spending, or net foreign spending.

View More Related Solutions