Don’t firms and households demand more money as prices rise

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Reference no: EM131303850

1. Why doesn't an increase in the price level shift the demand curve for real money balances to the right? Don't firms and households demand more money as prices rise?

2. In the market for money, use a graph to explain the effect of a decrease in the price level on the equilibrium interest rate. How does the change in the interest rate affect planned investment spending, consumption spending, and net exports?

Reference no: EM131303850

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