선생님 안녕하세요, 질문이 있어요.

According to real wealth effect, inflation lowers purchasing powers of individuals, hence consumption of people decrease because people try to save.

But in interest rate effect, you explain that when there is inflation, money demand rises because people try to hold more cash in order to buy the same stuff that was cheaper before. If inflation causes purchasing power to go down and people need to save, why would money demand increase?

감사합니다!

--> 안녕하세요! 학생분~If inflation causes purchasing power to go down and people need to save, why would money demand increase? --> 이부분에서 학생분이 추가로 assume 한 부분이 있지요? 사람들은 saving이 더 필요하다구요, 이런 추가 assume을 하시면 안되구요!! 그 가격이 올라간 물건을 더 산다는 것으로만 봐야 합니다. --> 그럼 MD증가!!

아시겠지요? 학생분 어서 진도 쭉쭉 나가세요!!

Sunny~