An increase in wealth
A)increases real money demand and the real interest rate,and shifts the LM curve up.
B)decreases real money demand and the real interest rate,and shifts the LM curve down.
C)increases real money demand and the real interest rate,but does not shift the LM curve.
D)decreases real money demand and the real interest rate,but does not shift the LM curve down.

Question

Quizplus · Accepted Answer

An increase in wealth results in an increase in the demand for money, as consumers have more money to spend. This raises the real interest rate by causing bond prices to fall. As a result, the LM curve shifts up.

An Increase in Wealth