In general, monetary economic theory states that the demand for money is proportional to:
A) nominal income.
B) the unemployment rate.
C) the population.
D) the exchange rate.

Question

Quizplus · Accepted Answer

According to the quantity theory of money, the demand for money is directly proportional to nominal income. As nominal income increases, there is a greater need for money to facilitate transactions. The other options (unemployment rate, population, and exchange rate) are not directly related to the demand for money.

In General, Monetary Economic Theory States That the Demand for Money