Q demand for money and gdpthe demand for money also relies, Ask an Expert

Economics

Q. Demand for money and GDP?

The demand for money also relies on the GDP as GDP is closely associated to national income. If you choose to hold a fixed proportion of your wealth as money, you would want to hold more money when Y increases (you will want to hold more bonds as well). In IS-LM model we presume that demand for money is positive function of GDP.

As demand for money relies on Y and R in the IS-LM model, we write M_D(Y, R) for demand for money. Remember that it relies positively on Y but negatively on R.

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Macroeconomics, Economics

Category:- Macroeconomics
Reference No.:- M9577735

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