I am currently looking through Mankiw "Economics" (5th edtion).
I have come across this statement on page 664. When talking about lowering taxes to stimulate the economy
[lowering taxes, increases disposable income and...] "Increased incomes lead to higher money demand". [which tends to lead to higher interest rates and thus crowding out investment and offsetting the effects of lower taxes]
I am not sure of the logic behind this statement.
It feels like saying "If I give someone more apples, they will demand more apples". OK I can see the argument that the more we have the more we desire. But I have a feeling that that's not the line of argument here - not very "Mankiwian".
Can anyone explain why having more "money in your pocket" increases demand for money?