Respuesta :
With a fixed supply of money and a downward-sloping aggregate demand curve, an increase in money demand does not change the price paid for its use, known as the discount rate.
The money supply is the amount of currency in form of cash and liquid instruments in the economy of a country. A decrease in the money supply of the economy will reduce aggregate demand. Similarly, an increase in money supply will reflect an increase in aggregate demand.
The discount rate is the interest rate charged by Federal Reserve from the banks for small-term loans. The discount rate is also used in discounted cash flow analysis while determining the value of future cash flow. Discount cash flow analysis determines whether the current project is profitable or not based on the estimated cash flow in the future.
While determining the future cash flow of a project, the discount rate is the weighted average cost of capital. In the case of investment or business, the discount rate used is a risk-free rate of interest.
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