In the money market, if real GDP increases, then the demand for money ________ and the equilibrium nominal interest rate ________.
A) decreases; rises
B) increases; does not change
C) decreases; falls
D) increases; falls
E) increases; rises

Question

Quizplus · Accepted Answer

When real GDP increases, the demand for money increases because businesses and consumers are spending more. As the demand for money increases, the equilibrium nominal interest rate also rises due to the higher demand for loans and financial resources.

In the Money Market, If Real GDP Increases, Then the Demand