Economic boom raises money demand

Step by step

1. 1

   Start at equilibriumequilibriumThe point where opposing forces balance, quantity supplied equals quantity demanded, so there's no pressure for price to change..

2. 2

   Incomes and spending surge, people need more money for transactions at every rate.

3. 3

   Md shifts right; with Ms fixed, the rate rises. Booms tighten money markets on their own.

Where this shows up

Examiners ask this as: money demand income, transactions demand rises.