Based on the model of the money market, when real GDP increases, the equilibrium interest rate should
A) stay the same.
B) increase.
C) decrease.
D) increase to the same extent that the supply of money increases.

Question

Quizplus · Accepted Answer

According to the model of the money market, an increase in real GDP leads to an increase in the demand for money. This increase in demand for money causes the equilibrium interest rate to increase, as there is more competition for the available supply of credit in the economy.

Based on the Model of the Money Market, When Real