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Q. Demand for money and GDP?
The demand for money also relies on the GDP as GDP is closely associated to national income. If you choose to hold a fixed proportion of your wealth as money, you would want to hold more money when Y increases (you will want to hold more bonds as well). In IS-LM model we presume that demand for money is positive function of GDP.
As demand for money relies on Y and R in the IS-LM model, we write MD(Y, R) for demand for money. Remember that it relies positively on Y but negatively on R.
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