How would you expect a fall in a country's population to alter its aggregate money demand...

How would you expect a fall in a country's population to alter its aggregate money demand function? Would it matter if the fall in population were due to a fall in the number of households or to a fall in the average size of a household?

A.There would be an increase in money demand because fewer people will need to produce and consume GNP. The increase in money demand would be larger if the decrease in population was due to a fall in the average size of a household.

B. There would be a decrease in money demand because there would be fewer transactions. The decrease in money demand would be larger if the decrease in population was due to a fall in the average size of a household.

C. There would be an increase in money demand because fewer people will need to produce and consume GNP. The increase in money demand would be larger if the decrease in population was due to a fall in the number of households.

D.There would be a decrease in money demand because there would be fewer transactions. The decrease in money demand would be larger if the decrease in population was due to a fall in the number of households.

Solutions

Expert Solution

Solution

Option B and D is Correct and Same Answer

B) & D) There would be a decrease in money demand because there would be fewer transactions. The decrease in money demand would be larger if the decrease in population was due to a fall in the average size of a household.

Reason -

A fall in a country’s population would reduce money demand, all else equal, since a smaller population would undertake fewer transactions and thus demand less money. This effect would probably be more pronounced if the fall in the population were due to a fall in the number of households rather than a fall in the average size of a household since a fall in the average size of households implies a population decline due to fewer children who have a relatively small transactions demand for money compared to adults. The effect on the aggregate money demand function depends upon no change in income commensurate with the change in population— else, the change in income would serve as a proxy for the change in population with no effect on the aggregate money demand function.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

How would you describe a typical recession using an aggregate demand--aggregate supply graph?

How would you describe a typical recession using an aggregate demand--aggregate supply graph? Supply decreases, shifts left. Demand increases, shifts right Supply increases, shifts right None of the answers Demand decreases, shifts left

How does a fall in aggregate demand affect prices, interest rates and output in the long...

How does a fall in aggregate demand affect prices, interest rates and output in the long and short-run (Giving reference to the IS-LM AS-AD model throughout).

If people are made unemployed because of a fall in aggregate demand this is known as:...

If people are made unemployed because of a fall in aggregate demand this is known as: Select one: a. Structural unemployment b. Frictional unemployment c. Cyclical unemployment d. Natural Rate of unemployment e. Seasonal unemployment Which of the following describes a part of the transmission mechanism? Select one: a. the central bank undertakes open market sales and the resulting interest rate increase encourages people to save more b. a change in real money balances causes a portfolio disequilibrium and asset...

If there is excess demand in a market, we can expect that: A) prices will fall...

If there is excess demand in a market, we can expect that: A) prices will fall because some suppliers will find it in their interest to lower prices. B) prices will rise because some suppliers will find it in their interest to raise prices. C) the demand curve will shift to the left to restore equilibrium. D) the demand curve will shift to the right to restore equilibrium

Compare the effects of an aggregate-demand-induced recession with an aggregate-supply-induced recession. How would you recognize that...

Compare the effects of an aggregate-demand-induced recession with an aggregate-supply-induced recession. How would you recognize that a recession is induced by demand or supply? What policies would be appropriate in the first case and what in the second?

Would you expect Marginal Utility to rise or fall with additional consumption of a good? Why?...

Would you expect Marginal Utility to rise or fall with additional consumption of a good? Why? Provide one or two examples. Looking for a post of 150+ words

1a. Consider demand for gasoline in Irvine. Would you would expect demand to be more elastic...

1a. Consider demand for gasoline in Irvine. Would you would expect demand to be more elastic in the short run or the long run? Group of answer choices a. In short run, demand is more elastic b. In long run, demand is more elastic 1b. Please explain your reasoning: (Select all that are true) Group of answer choices a. Because in the short run, prices change more frequently b. Because in the long run, people can switch to greener transportation...

Question