Which of the following, other things constant, will shift the money demand curve to the left?
A) an increase in the interest rate
B) a decrease in the interest rate
C) a decrease in real GDP
D) an increase in real GDP

Question

Which of the following, other things constant, will shift the money demand curve to the left?  
A) an increase in the interest rate 
B) a decrease in the interest rate 
C) a decrease in real GDP 
D) an increase in real GDP

Quizplus · Accepted Answer

When there is a decrease in real GDP, people generally have less money to spend on goods and services, which leads to a decrease in the demand for money. Therefore, it will shift the money demand curve to the left.

Answer: D 
 When there is an increase in real GDP, people tend to have more disposable income, which leads to an increase in demand for money. Therefore, it will shift the money demand curve to the right.

Therefore, only choice C is the correct choice for this question.

Which of the Following, Other Things Constant, Will Shift the Money