Income and price level Effect
The next effect is the income – price level effect. As cash balances are built up. People’s attempts to acquire other assets raise the prices of assets and drive down the interest rate. That will lend to produce an increase in spending. Along standard tively. To look at it more broadly. The prices of sources of services will be raised relative to the prices of the service flows themselves. This leads to an increase in current income. In addition , it leads to an increase in spending on producing sources of services in response to the higher price which can now be obtained for them.