All else equal, a decrease in the real GDP _____ the transaction demand for money and therefore causes a _____ shift in the money demand curve.

Question

Quizplus · Accepted Answer

A decrease in the real GDP reduces the amount of money people need for transactions because there is less economic activity requiring money exchanges. This reduction in transaction demand for money leads to a leftward shift in the money demand curve, as people will desire less money at each interest rate.

All Else Equal, a Decrease in the Real GDP _____