A 20% increase in the aggregate price level will increase the quantity of money demanded by:
A) 20%.
B) the money multiplier.
C) 10%.
D) half of the money multiplier.

Question

Quizplus · Accepted Answer

A 20% increase in the aggregate price level directly increases the quantity of money demanded by the same percentage, 20%, because people will need more money to purchase goods and services at higher prices.

A 20% Increase in the Aggregate Price Level Will Increase