Suppose that because of a rising price level, consumers start carrying more of their wealth as cash, in order to carry out transactions, and thus are…
Suppose that because of a rising price level, consumers start carrying more of their wealth as
cash, in order to carry out transactions, and thus are less willing to put their wealth into other
assets – such as stocks or bonds. Depict the effect this will have on the market for loanable funds,
and explain what will happen to both interest rates and investment.
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