A decrease in the demand for money would result from:
A)an increase in income.
B)a decrease in real GDP.
C)an increase in the price level.
D)an increase in nominal GDP.

Question

Quizplus · Accepted Answer

According to the quantity theory of money, the demand for money is primarily determined by the level of nominal GDP. A decrease in real GDP would mean a decrease in the demand for goods and services, and therefore a decrease in the demand for money to purchase those goods and services. This would result in a decrease in the demand for money. The other options would result in an increase in the demand for money.

A Decrease in the Demand for Money Would Result From