In a two-asset economy with money and T-bills, the quantity of money that people will want to hold, other things being equal, can be expected to:
A)increase as the real GDP interest rate increases.
B)decrease as the real GDP interest rate increases.
C)decrease as real GDP increases.
D)none of these.

Question

Quizplus · Accepted Answer

As the interest rate increases, the opportunity cost of holding money increases, leading people to hold less money and invest more in interest-bearing assets like T-bills.

In a Two-Asset Economy with Money and T-Bills, the Quantity