As the price level decreases, money demand (money supply unchanged.____, interest rates ____, investments ____, and the quantity of RGDP demanded ____.
A)increases, decrease, increase, decreases
B)increases, increase, increase, increases
C)decreases, decrease, decrease, increases
D)decreases, decrease, increase, increases
E)increases, decrease, decrease, decreases

Question

Quizplus · Accepted Answer

As the price level decreases, the demand for money decreases because people need less money for transactions. This leads to a decrease in interest rates, which encourages more investment. As a result, the quantity of real GDP demanded increases.

As the Price Level Decreases, Money Demand (Money Supply Unchanged