AuthorTopic: Econ - impact of price level and inflation on money demand
shah110
@2015-02-26 15:29:48
Hi all

I have a question on demand for nominal money

I read that :
when price level goes up, then demand for nom money goes up. I need more money to buy goods
when inflation rate goes up, then nominal int rate goes up, demand for nom money goes down. I prefer not to hold money

but for me price level and inflation are linked (if not the same) so how can they have opposite effect on demand for money

little confused here...

tks for your help
ash18
@2015-03-06 12:58:05
I see you are getting confused here between price level and inflation. Inflation is when a price level goes up basically when the value of the currency depreciates. I suggest u focus on one thing when applying a theory rather than accumulating various thoughts in your mind which hold no significance. All the best. Good luck

CFA Discussion Topic: Econ - impact of price level and inflation on money demand

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