The quantity demanded of money is negatively related to _____, and the demand for money is positively related to _____.
A) the interest rate; real GDP
B) the interest rate; unemployment
C) real GDP; the interest rate
D) real GDP; the money supply

Question

Quizplus · Accepted Answer

The quantity demanded of money is negatively related to the interest rate because as the interest rate increases, the opportunity cost of holding money increases, and people are willing to hold less money. The demand for money is positively related to real GDP because as the economy expands and income increases, the demand for money for transactions and investment purposes also increases.

The Quantity Demanded of Money Is Negatively Related to _____