Which of the following events will lead to an increase in the demand for money ?
Correct answer: B. An increase in the level of aggregate output
- A. An increase in the interest rate
- B. An increase in the level of aggregate output
- C. A decrease in the price level
- D. An increase in the supply of money
Explanation
A higher level of aggregate output creates more transactions, so people need larger money balances and demand more money. An increase in the interest rate generally reduces money demand, while an increase in money supply does not itself shift money demand.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? [email protected]
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.
Practise Macroeconomics
1,499 free Macroeconomics MCQs from Economics, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Discussion
Stuck on an option, or know a faster way to get there? Ask or explain it here.
No comments yet. Be the first to explain this one.
Exams that ask Economics questions like this
Economics is on 3 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Macroeconomics questions
The main reason that people hold money to buy things is referred to as the ?
The opportunity cost of holding money is determined by ?
In terms of the demand for money the interest rate represents ?
If the quantity of money demanded exceeds the quantity of money supplied then the interest rate will ?
A bank has excess reserves to lend but is unable to find anyone to borrow the money This will _________ the size of the money multiplier?
The difference between a bank's actual reserves and its required reserves is its?