Discussion Board Sample

Discussion Board 4 and 5
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Discussion Board 4 and 5
Money’s demand curve is downward sloping, as expressed by the money market, which is an economic model. This curve depicts that people tend to hold less money through cash or checking accounts when the interest rates are higher since they prefer to take advantage of alternative investment forms like bonds. The money demand curve may shift due to a change in the real gross domestic product (GDP), preferences, transfer costs, and price level. According to Benchimol and Qureshi (2020), an increase in real GDP leads to a corresponding rise in income levels, which has a ripple effect on money demand. Preferences encompass people's attitude toward risk and the perceived value of having a certain amount of cash at hand. For example, while deposits attract lower interests than bonds, some people may feel it is risky because of a possible default by the bond issuer. Expensive transfer costs between nonmoney and money accounts increase the demand for cash, while a decline in transfer costs causes a fall in demand for money. Finally, high piece levels for general goods and services implies more money required to purchase them.
An increase in real income means there is more money, a nominal good, among households. People tend to demand or need more money when their real income increases. For example, a household whose total income is $200,000 per month requires more money than their counterpart with $10,000 real income monthly. That is, each interest rate attracts an increased demand for money. This explanation can be illustrated, as shown in the graph below. The initial money demand curve refers to a lower income, while the new money demand curve is the slope following a shift due to increased real income.
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