When price levels rise, the quantity of nominal money demanded will and the quantity of real money demanded will .
A) increase; decrease
B) increase; increase
C) increase; stay the same
D) decrease; increase

Question

Quizplus · Accepted Answer

When price levels rise, people need more nominal money to carry out the same transactions, so the nominal money demanded increases. However, the real money demanded, which is adjusted for price levels, stays the same because it reflects the purchasing power needed, not the nominal amount.

When Price Levels Rise, the Quantity of Nominal Money Demanded