A decrease in the demand for money would result from a(n):
A) increase in income.
B) increase in real GDP.
C) decrease in the price level.
D) increase in nominal GDP.

Question

Quizplus · Accepted Answer

According to the Quantity Theory of Money, the demand for money is primarily determined by the price level. When the price level decreases, people need less money to buy the same amount of goods and services, so the demand for money decreases. Therefore, a decrease in the demand for money would result from a decrease in the price level (choice C). An increase in income (choice A), an increase in real GDP (choice B), and an increase in nominal GDP (choice D) would all increase the demand for money.

A Decrease in the Demand for Money Would Result from A(n)