An increase in nominal GDP will
A) increase the transactions demand and the total demand for money.
B) decrease the transactions demand and the total demand for money.
C) increase the transactions demand for money but decrease the total demand for money.
D) decrease the transactions demand for money but increase the total demand for money.

Question

Quizplus · Accepted Answer

An increase in nominal GDP means that there is an increase in economic activity and more goods and services are being exchanged, which increases the transactions demand for money. Additionally, as nominal GDP increases, there is an increase in income and wealth, which leads to an increase in the total demand for money for savings and investment purposes. Therefore, option A is the correct choice.

An Increase in Nominal GDP Will