If the demand for real money balances depends on both interest rates and nominal national income in could be expressed in simple algebra as:

Question

Quizplus · Accepted Answer

The demand for real money balances is typically expressed as a function of nominal income (Y) and interest rates (i), where k is a constant representing the sensitivity to income and h is a constant representing the sensitivity to interest rates. The correct expression is kY - hi, indicating that demand increases with income and decreases with higher interest rates.

If the Demand for Real Money Balances Depends on Both