When price levels rise, the quantity of nominal money demanded will __________and the quantity of real money demanded will _________.

Question

Quizplus · Accepted Answer

When price levels rise, people need more nominal money to conduct 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 rather than the nominal amount.

When Price Levels Rise, the Quantity of Nominal Money Demanded