It is reasonable to think that technological innovations in


It is reasonable to think that technological innovations in the banking sector have lowered the transactions costs that consumers face with regard to cash management. Our theory suggests that this should lead to lower real cash balances. Yet in the data we see that real cash balances have actually increased over the last forty years. Does this contradict our theory of money demand and supply? Explain why or why not.

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Business Economics: It is reasonable to think that technological innovations in
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