Determining of Interest Rate, II - The supply and the demand for central bank money - The demand for money
3 important questions on Determining of Interest Rate, II - The supply and the demand for central bank money - The demand for money
When will people hold more money?
peoplewillhold more money thehigherthe level of transactions andthelowerthe interest rate on bonds.
In what 2 things do people hold their money?
Assumption: people hold a fixedproportion of their money in currency(c) and by implication hold a fixedproportionin deposit accounts (1-c).
What what leads a demand for deposit accounts?
Demand for deposit accounts leads to a demand by banks for reserves! (which is the second component of the demand for central bank money).
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