Other things constant, a decrease in nominal GDP will generally
A) increase the demand for money.
B) decrease the demand for money.
C) increase the nominal interest rate.
D) decrease the money supply.

Question

Quizplus · Accepted Answer

Nominal GDP is a key determinant of the demand for money. When nominal GDP decreases, so does the demand for money as people and businesses are spending less. This is because a smaller amount of goods and services are being produced and exchanged, leading to less need for money to facilitate those transactions. As a result, the demand for money decreases.

Other Things Constant, a Decrease in Nominal GDP Will Generally