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Suppose the Demand for Real Money Balance Function Is (MD/P)

Question 53

Multiple Choice

Suppose the demand for real money balance function is (MD/P) = kY - hi, where Y is real GDP and i is the market interest rate. The real money demand curve (drawn in a diagram with respect to interest rates measured on the vertical axis) :


A) shift to the left when real GDP falls
B) shift to the right when real GDP falls
C) become steeper when real GDP falls
D) become flatter when real GDP falls.

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