Which of the following is most likely to lead to a decrease of 10% in the nominal demand for money?

Question

Quizplus · Accepted Answer

According to the quantity theory of money, nominal demand for money is directly proportional to price level. Therefore, a decline of 10% in the price level will lead to a decrease of 10% in the nominal demand for money. The other options do not have a direct relationship with the nominal demand for money. An increase in real income may lead to an increase in demand for money (as people have more money to spend) and a decrease in real income may lead to a decrease in demand for money (as people have less money to spend), but it does not affect nominal demand for money. An increase in price level may lead to an increase in nominal demand for money (as people need more money to buy the same goods) but it does not lead to a decrease in nominal demand for money.

Which of the Following Is Most Likely to Lead to a Decrease