ppp-Lecture8BusinessCycles2MoneyandMonetarySystemPPT.pptVIP

* * * * * * * * * * * * A rise in the price level increases the nominal quantity of money but doesn’t change the real quantity of money that people plan to hold. The interest rate The interest rate is the opportunity cost of holding wealth in the form of money rather than an interest-bearing asset. A rise in the interest rate decreases the quantity of money that people plan to hold. Real GDP An increase in real GDP increases the volume of expenditure, which increases the quantity of real money that people plan to hold. Financial innovation that lowers the cost of switching between money and i