In the long run, a 1% increase in real GDP tends to
A) cause a 1% increase in the demand for money.
B) cause a less than 1% increase in the demand for money.
C) cause a greater than 1% increase in the demand for money.
D) have virtually no effect on the demand for money, because the interest rate is the main determinant of the demand for money.
B
You might also like to view...
What is the cost of money?
(A) The economy's use of open market operations. (B) The bank's use of money creation. (C) The smoothing out of fluctuations in the market. (D) The price of the interest rate
Refer to Figure 11.2. Assume the economy is in equilibrium at 1, where real GDP equals potential GDP, and then the economy experiences a positive demand shock. Other things equal, the positive demand shock is best represented by a(n)
A) movement up along the Phillips curve. B) movement down along the Phillips curve. C) upward shift of the Phillips curve. D) downward shift of the Phillips curve.