Because money serves as a medium of exchange, an increase in real GDP:
A)increases the buying and selling of goods and services and so increases the demand for money.
B)increases the buying and selling of goods and services and so decreases the demand for money.
C)decreases the buying and selling of goods and services and so increases the demand for money.
D)decreases the buying and selling of goods and services and so decreases the demand for money.

Question

Quizplus · Accepted Answer

An increase in real GDP means more goods and services are being produced and exchanged, which in turn leads to an increase in the demand for money to facilitate these transactions. Therefore, choice A is the best answer.

Because Money Serves as a Medium of Exchange, an Increase