-In the above figure, suppose the economy is initially on the demand for money curve MD₁. What is the effect of an increase in real GDP? A) The demand for money curve would shift rightward to MD₂. B) The demand for money curve would shift leftward to MD₀. C) There would be a movement upward along the demand for money curve MD₁. D) There would be a movement downward along the demand for money curve MD₁.

Question

Quizplus · Accepted Answer

An increase in real GDP increases the demand for transactions, which in turn increases the demand for money. This is represented by a rightward shift in the demand for money curve.

-In the Above Figure, Suppose the Economy Is Initially on the Demand