Financial Markets - The Demand for Money - Deriving(=afleiden) the demand for money

3 important questions on Financial Markets - The Demand for Money - Deriving(=afleiden) the demand for money

What is the equation describing the demand of money?

See attentively(=aandachtig) the picture!

Explain for both of the 2 variables of the Md equation how they affect the demand for money.

The demand for money:

  • increases in proportion to nominal income (€Y). Depends positively.
  • depends negatively on the interest rate (L(i) and the negative sign underneath). 

How does the graphical expression of the demand for money look like?

See attentively the picture!

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