All else the same,when real GDP increases,the
A)supply of money does not change,and the demand for money does not change.
B)demand for money increases.
C)supply of money increases.
D)demand for money decreases.
E)supply of money decreases.

Question

Quizplus · Accepted Answer

When real GDP increases, the demand for money also increases because individuals and firms need more money to conduct more transactions. This is because real GDP growth typically indicates an expansion in economic activity, resulting in more transactions, trade, investment, and production which necessitates greater liquidity. Moreover, as economic growth leads to increased incomes and profitability, it also increases the demand for credit, which in turn fuels the demand for money by borrowers. Therefore, the correct answer is B, the demand for money increases.

All Else the Same,when Real GDP Increases,the