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Determine whether each of the following would lead to an increase, a decrease, or no change in the quantity of money people wish to hold. Also determine whether there is a shift in the money demand curve or a movement along a given money demand curve

a. A decrease in the price level

b. An increase in real output

c. An improvement in money?s ability to act as a store of value

d. An increase in the market interest rate

Take a shot. What do you think?

However, first consider why people wish to hold money. Obviously, money is a means of exchange. People also hold money for speculative reasons. That is, money is a asset, which could be used to pounce on investment opportunities that happen to pass by.

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    Decrease increase increase decrease shifrt

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