Rising real GDP will increase the demand for money and short-term interest rates.

Name: Rising real GDP will increase the demand for money and short-term interest rates.
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Question

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When real GDP rises, individuals and businesses have more income and therefore want to hold more money for transactional purposes, which increases the demand for money. This increased demand for money puts upward pressure on short-term interest rates as borrowers compete for limited funds.

Rising Real GDP Will Increase the Demand for Money and Short-Term