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.

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 as the opportunity cost of holding money increases. An increase in real GDP shifts the money demand curve to the right because higher income leads to higher transactions demand for money.

An Increase in the Nominal Interest Rate Creates a the Money