Inflation a rise in the price level causes demand for money

Reference no: EM13203143

State whether you agree or disagree with the following statement and explain why:

a. When the real economy expands (Y rises), the demand for money expands. As a result households hold more cash and the supply of money expands.

b) Inflation a rise in the price level causes demand for money to decline. Because inflation causes money to be worth less, households desire to hold less of it.

c. If the Fed buys bonds in the open market and at the same time we experience a recession, interest rates will no doubt rise.

Reference no: EM13203143

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