An increase in real GDP causes the demand for real money balances to
A)rise.
B)fall.
C)remain unaffected.
D)rise,fall,or remain unaffected depending on the interest rate at the time.

Question

Quizplus · Accepted Answer

An increase in real GDP leads to an increase in nominal income, which in turn leads to an increase in the demand for money to facilitate transactions. Therefore, the demand for real money balances rises when there is an increase in real GDP.

An Increase in Real GDP Causes the Demand for Real