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Real money demand often rises more than real GDP due to factors like increased transaction needs and heightened precautionary motives among individuals and businesses. During periods of economic uncertainty or inflationary expectations, people tend to hold more cash as a safeguard against potential financial instability. Additionally, financial innovation and the growth of electronic payments can lead to a greater demand for liquidity, further amplifying the divergence between real money demand and GDP growth.
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How does a decrease in the price level impact real wealth and aggregate demand?
A decrease in the price level can increase real wealth because people's money can buy more goods and services. This can lead to an increase in aggregate demand as consumers are more willing to spend money, which can stimulate economic growth.
What factors influence the demand for money?
In the simplest models, the supply of money and the real interest rate.
What would be the effect on the demand for narrow money if an increase in real GDP?
what's the answer?
Why does aggregate demand go up when money supply increases?
It doesn't. Money supply has no effect on aggregate demand. Aggregate demand is only effected by the buying power of money, real interest rate, and the real prices of exports and imports. If the supply of money goes up it only causes a short term decrease in the nominal interest rate. The price level is not accompanied by a decrease in the supply of money so the real interest rate does not rise.
Why is money suppy a major determinant of interest rates?
Because: Real interest rate occurs when real money demand = money supply When money supply changes, the equilibrium interest rates changes as this equation shows.
How does a decrease in the price level impact real wealth and aggregate demand?
A decrease in the price level can increase real wealth because people's money can buy more goods and services. This can lead to an increase in aggregate demand as consumers are more willing to spend money, which can stimulate economic growth.
What factors influence the demand for money?
In the simplest models, the supply of money and the real interest rate.
What would be the effect on the demand for narrow money if an increase in real GDP?
what's the answer?
Why does aggregate demand go up when money supply increases?
It doesn't. Money supply has no effect on aggregate demand. Aggregate demand is only effected by the buying power of money, real interest rate, and the real prices of exports and imports. If the supply of money goes up it only causes a short term decrease in the nominal interest rate. The price level is not accompanied by a decrease in the supply of money so the real interest rate does not rise.
Why is money suppy a major determinant of interest rates?
Because: Real interest rate occurs when real money demand = money supply When money supply changes, the equilibrium interest rates changes as this equation shows.
Why rise in price level cause interest rates rise?
Interest rates can be thought of as the cost of money. Therefore assuming a fixed amount of money in the economy, if the price level increases, real income decreases and consequently money may have to be borrowed in order to maintain real income. But because there's a fixed amount of money in the economy there will be more demand for money than there'd be supply of. In essence, the increase in the price level, increases the demand of money and also the price of money which, coincidently, is the interest rate.
Why has the Brazilian Real appreciated so much in the last 5 years?
demand
Whats the real reason why we paid so much gas?
Supply and demand, plus speculation about the future supply and demand of oil.
What is the salary range of a new rapper?
It all depends on the rapper, Usually not too much, since they are just getting on the scene. Once the Supply&Demand is up, That's when the real Money comes in.
How much money do farmers get?
Get a real job
Concern about an international crisis has caused consumers to save their money and postpone big purchases what is the effect on aggregate demand and supply?
aggregate demand will decrease, lowering both real GDP and the price level
What would an increase in money demand do to the interest rate?
This depends on a range of factors, including what cause the change, whether the change was in quantity along a curve or a shift of the curve, the monetary regime in place in the country, and the decision of that regime in regards to increased money demand. However, the simplest way to restore money demand to its original location would be to raise the interest rate, thus making it most costly to hold money and decreasing money demand. So if the regime wished to restore money demand, then it would raise the real interest rate.
