Question

An economy begins in long-run equilibrium, and then a change in government regulations allows banks to start paying interest on checking accounts. Recall that the money stock is the sum of currency and demand deposits, including checking accounts, so this regulatory change makes holding money more attractive.

How does this change affect the demand for money?

please write it in your own words

Answer 1

An economy begins in Long run equilibrium and then a change in the government allows the banks to start oaypay interest on checking account.

Money is the sum of currency and demand deposit,inclu incl checking account so the regulatory changes make holding money more attractive.

demand for money will increase because interest that is being paid on checking account makes holding money more attractive.

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