Explain the shape of money demand curve with the help of-00639
This subjective question is related to the book/course
vu cs403 Database Management Systems.
It can also be found in
vu cs403 Mid Term Solved Past Paper No. 4.
Question 1: Explain the shape of money demand curve with the help of diagram.
Answer:
- Money demand Md increases with income levels. Money demand Md falls with interest rates.
- In this concept we are talking about real income and real interest rate not the nominal income and nominal interest rate. So this implies to the demand of real money.
- Whether nominal and real money supply is equal or not depends much on the assumption regarding prices. If prices are assumed fixed, then the two are equal, otherwise not.
- As you can see from the diagram where money demand in on the x-axis and income is on the y-axis, and there are various level showns like L1,L2,L3.
