In which of the following situations is it certain that the quantity of money demanded by the public will decrease?
A) nominal GDP decreases and the interest rate decreases
B) nominal GDP increases and the interest rate decreases
C) nominal GDP decreases and the interest rate increases
D) nominal GDP increases and the interest rate increases

Question

Quizplus · Accepted Answer

When nominal GDP decreases and interest rates increase, individuals are likely to spend less money because they have less disposable income and the opportunity cost of holding money (in terms of foregone interest earnings) is lower. As a result, demand for money will decrease.

In Which of the Following Situations Is It Certain That