Real money demand is a function of
A) the level of transactions in the economy.
B) increasing real income.
C) increasing real income and decreasing nominal interest rates.
D) increasing real income and decreasing inflation rates.
E) increasing real income and increasing inflation rates.

Question

Quizplus · Accepted Answer

Real money demand typically increases with rising real income as people need more money for transactions. It also increases with decreasing nominal interest rates, as the opportunity cost of holding money decreases.

Real Money Demand Is a Function of