An increase in the nominal interest rate creates a_________ the money demand curve, and an increase in real GDP creates a _______the money demand curve.
A) rightward shift of; movement up along
B) leftward shift of; rightward shift of
C) movement up along; rightward shift of
D) movement down along; leftward shift of

Question

Quizplus · Accepted Answer

An increase in the nominal interest rate causes a movement up along the money demand curve because people hold less money when interest rates are higher. An increase in real GDP shifts the money demand curve to the right because higher income leads to higher demand for money.

An Increase in the Nominal Interest Rate Creates A_________ the Money