All else equal, an increase in the real GDP increases the _____ demand for money and therefore causes a _____ shift in the money demand curve.

Question

Quizplus · Accepted Answer

An increase in real GDP means that the economy is growing, and as a result, people and businesses are likely to engage in more transactions. This increases the transaction demand for money, as more money is needed to facilitate these additional transactions, leading to a rightward shift in the money demand curve.

All Else Equal, an Increase in the Real GDP Increases