Question
Asked Nov 20, 2019
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 How would each of the following affect the demand for money?

  1. a tax on bonds held by individuals
  2. a forecast by the Central bank that interest rates will rise sharply in the next quarter
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Expert Answer

Step 1
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Demand for money refers to the desire of the people to hold financial assets in the form of money. Such as, currency, bank deposits and so on rather to investments.

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Step 2
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A tax imposed on the bonds held by individuals will reduce the demand for bonds and people will desire to hold money as an alternative to bonds.

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