Why do people hold money in the classical model? What will be ...

[Lisaclaire]

Why do people hold money in the classical model?
 
  What will be an ideal response?

Question 2

In the closed economy IS-LM model, an increase in government spending crowds-out
 
  a. prices.
  b. the money supply.
  c. consumption.
  d. investment.
  e. both c and d.

[emily12345]

Answer to Question 1

People hold money because it is a medium of exchange, meaning that it is used in purchasing goods and services. It is not valued as an asset in and of itself.

Answer to Question 2

D

[Lisaclaire]

Excellent

[momolu]

Thanks for the timely response, appreciate it