Both increases in the price level and increases in real GDP will decrease the demand for money.

Question

Quizplus · Accepted Answer

Increases in the price level tend to increase the demand for money as people need more money to purchase goods and services at higher prices. Increases in real GDP also tend to increase the demand for money as more economic activity requires more transactions and money to facilitate them. Therefore, both of these factors would actually increase the demand for money, not decrease it.

Both Increases in the Price Level and Increases in Real