ECON 51D – Economic Principles

The Arbezani money demand is given by the following equation: Md = 5,000 – 10,000 r + 0.5 Y. Md is money demand, r is the real interest rate and Y is aggregate income. Money supply (Ms) is fixed at Ms = 4,500. Suppose that aggregate income is 3,000. Graph the money demand curve. Why does the equation have a negative slope? ................
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