UNIT 4: The Demand for Money

(3/9/16)

The Demand for $What happens if price level increases?
- Shift to the right

Money Demand Shifters:1) Changes in price level
2) Change in income
3) Change in taxation that affects investment

*Increasing the Money Supply
Increase money supply ---> Decrease interest rate ---> Increases investment ---> Increases AD

*Decreasing the Money Supply
Decrease money supply ---> Increase interest rate ---> Decrease investment ---> Decrease AD