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The Advent of Interest-Earning Chequing Accounts in the Early 1980s

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Essay

The advent of interest-earning chequing accounts in the early 1980s led many households to keep a larger proportion of their income in chequing accounts.Use the aggregate demand-aggregate supply model to illustrate graphically the impact in the short run and the long run of this change in money demand.Be sure to label:
i.the axes
ii.the curves
iii.the initial equilibrium values
iv.the direction the curves shift
v.the short-run equilibrium values
vi.the long-run equilibrium values.State in words what happens to prices and output in the short run and the long run.


Definitions:

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