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Explain about the short term and long term interest rate in money demand.
The Opportunity Cost of Holding Money Demand:
a. Short-term interest rates
Rates onto assets which come due in less than six-months.
These rates tend to shift together due to basic supply and demand. What is the reason? Investors will shift their money out of any short-term financial asset which offers a lower than average interest rate.
b. Long-term interest rates
Rates onto assets which come due into more than six-months.
If Country A had four times the initial level of real GDP per capita of Country B and it was growing at 1.4 percent a year, while real GDP was growing at 2.3 percent in Country B,
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What are the requirements for something to be considered money? Why does the dollar have value?
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