Question

5 Suppose that consumers finally decide to get rid of cash altogether, and only use debit cards. Nothing else changes, and the CB doesn't do anything either. What do you think will happen to money supply M and prices P in the short and long-runs? Does this change money demand?​

Answer 1

Answer:

yes

Explanation:

cause the real money you dont need to pay for transaction tax ony vat but with debit you cash our more money that when you are just buying with normal money

Answer 2

Answer:

The cash flow will be stopped and the flow of money through debit cards will increase.

Explanation:

As we know economy runs on demand and supply. Thus if consumers decide use only debit cards, the cash flow will decrease and will stop at one point. But the flow of money through debit cards will go on increasing. Prices of goods other than raw material used for making debit cards and debit card machines will remain same.