An increase in nominal GDP increases the demand for money because
A)interest rates will rise.
B)more money is needed to finance a larger volume of transactions.
C)bond prices will fall.
D)the opportunity cost of holding money will decline.

Question

Quizplus · Accepted Answer

An increase in nominal GDP means that there are more goods and services being produced in the economy. This means that more money is needed to finance these transactions, so the demand for money increases.

An Increase in Nominal GDP Increases the Demand for Money