Between 2008 and 2009, U.S. real GDP decreased from $13.2 trillion to $12.9 trillion. As a result, the real demand for money ________ and the demand for money curve ________.
A) decreased; shifted leftward
B) did not change; did not shift
C) increased; shifted leftward
D) decreased; shifted rightward.

Question

Quizplus · Accepted Answer

When real GDP decreases, the real demand for money typically decreases because there is less economic activity requiring transactions. This decrease in demand for money is represented graphically by a leftward shift of the demand for money curve.