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?© BrainMass Inc. brainmass.com October 16, 2018, 3:46 pm ad1c9bdddf
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 ...
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.
Nominal money supply and changes in price levels affect the aggregate demand curve in different ways.
A change in the real money supply can result either from a change in the nominal money supply through Federal Reserve policy (holding the price level constant) or from a change in the price level (holding the nominal money supply constant). The change in the nominal money supply causes a shift in the aggregate demand curve, whereas a change in the price level causes a movement along the aggregate demand curve. Explain.View Full Posting Details