When the money market is depicted in a diagram with the value of money on the vertical axis, what would shift money demand to the left?
A) an increase in the price level
B) a decrease in the price level
C) a decrease in real GDP
D) an increase in real GDP

Question

Quizplus · Accepted Answer

A decrease in real GDP would lead to less demand for money as people and businesses are spending less overall. This shift to the left in the money demand curve would lower the equilibrium value of money. An increase in the price level (A) would shift the money demand curve to the right, while a decrease in the price level (B) would also shift the curve to the left. An increase in real GDP (D) would also shift the curve to the right as economic activity and spending increase, leading to a greater demand for money.

When the Money Market Is Depicted in a Diagram with the Value