When real income increases other things equal we can expect the demand for real money holdings to ?
Correct answer: C. increase
- A. fall
- B. not change
- C. increase
- D. None of these
Explanation
Higher real income increases the volume of transactions people undertake, so they generally want to hold more real balances for payments. Therefore, demand for real money holdings increases, other things remaining equal.
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About Macroeconomics
The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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