An increase in real GDP will __________ the demand for money and ____________the equilibrium interest rate.
A)decrease; decrease
B)decrease; increase
C)increase; decrease
D)increase; increase

Question

Quizplus · Accepted Answer

An increase in real GDP increases the demand for money as businesses and consumers spend more. This increased demand for money, in turn, increases the equilibrium interest rate as lenders demand higher returns for the now more sought-after funds.

An Increase in Real GDP Will __________ the Demand for Money