Question

The demand curve for money will shift to the left if:

• I. Real GDP increases.
• II. Real GDP decreases.
• III. The interest rate increases.
• IV. The interest rate decreases.

(II) and (III) are correct.

(I) and (IV) are correct.

(II) and (IV) are correct.

Only (II) is correct.

Answer 1

Correct answer: (II) and (III) are correct.

 Decrase in real GDP causes people to demand less money for transactions.

Increase of interest rates decreases the quantity of money demanded.