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What effect would an increase in ATM fees have on demand for money?


redsoxfan5000

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My first thought was demand for money would decrease because people wouldn't want to give money to banks so they would just put more of their wealth in bonds. I realize people would put more money in currency but I wouldn't think that would offset the decrease in deposits. My friend argues that the increase in fees would lead to a higher demand for money because people would need more money to help cover the fees. Who is correct? Thank you

 

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  • 1 month later...

An increase in ATM fees would make consumers look for alternatives to paper money to use. The fees would be an incentive for people to use credit/debit cards; checks to pay bills, buy products.

 

Also I'm not sure the fees would make consumers do such a drasting thing like buy bonds (there is no correlations between the two) and yes your friend is somewhat right in my opinion, probably the currency will appreciate a little (since there will be a bigger demand for it).

Edited by Schwarzschild
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I doubt ATM fee increases would have any appreciable effect on the macroeconomy in the sense that overall demand for money could be affected. Bank holdings would not be affected - people would just swipe their card more often than extracting cash. Bank holdings are just as liquid with your atm card as they are with cash in a pragmatic sense. 

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