Which of the following statements is true regarding the relationship between the demand and supply of real money balances?
A) An increase in the money supply is likely to lead to a decrease in interest rates; a decrease in interest rates is likely to lead to an increase in real income; an increase is real income is likely to lead to an increase in the demand for real money balances.
B) An increase in the demand for real money balances is likely to lead to an increase in the supply of real money balances.
C) Increases in the supply of real money balances are just as likely to lead to a decrease in the demand for real money balances, as they are to lead to an increase in the demand for real money balances.
D) The demand and supply of real money balances are completely independent.
Correct Answer:
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