An increase in the price level will result in a(n)________ in the demand for money and cause the nominal interest rate to ________.
A) decrease; decrease
B) decrease; increase
C) increase; decrease
D) increase; increase

Question

Quizplus · Accepted Answer

An increase in the price level leads to an increase in the demand for money as people need more money to purchase goods and services at higher prices. This increased demand for money, in turn, causes the nominal interest rate to increase as the cost of borrowing money goes up.

An Increase in the Price Level Will Result in A(n)________