Suppose that a typical basket of goods is now more expensive than it used to be. All else equal, we would expect:
A) the demand for money to shift inward.
B) a downward movement along a fixed money demand curve.
C) the demand for money to shift outward.
D) an upward movement along a fixed money demand curve.

Question

Quizplus · Accepted Answer

When the price of goods increases, people generally need more money to purchase the same basket of goods they used to buy before. This means that the demand for money will shift outward, as people will need more money to conduct the same transactions they used to conduct with less money before.

Suppose That a Typical Basket of Goods Is Now More