The two most important factors that cause the money demand curve to shift are A. the...
The two most important factors that cause the money demand curve to shift are A. the nominal interest rate and the money supply. B. real GDP and the price level. C. nominal GDP and the Fed. D. the price level and the nominal interest rate.
Homework Answers
Answer: B
Money demand curve is the relationship between quantity of money and interest rate. This curve is downward slopping, because there is an inverse relationship.
Real GDP indicates income of people; increasing income increases the transaction demand of money.
Increasing price level indicates inflation. If there is inflation, there would be more demand of money because of purchasing at higher cost.
In both these cases, the demand of money curve would shift to the right direction.
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