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 the above.

Question

Quizplus · Accepted Answer

The quantity of money that people will want to hold, other things being equal, will decrease as the real GDP interest rate increases. This is because higher interest rates on T-bills make holding money relatively less attractive as an investment, leading to a decrease in the demand for money.

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