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In Business / High School | 2025-07-06

An increase in real GDP can shift
1) money demand to the right and decrease the equilibrium interest rate.
2) money demand to the right and increase the equilibrium interest rate.
3) money demand to the left and decrease the equilibrium interest rate.
4) money demand to the left and increase the equilibrium interest rate.

Asked by kendylmarkham

Answer (2)

An increase in real GDP leads to a rightward shift in money demand, which subsequently increases the equilibrium interest rate due to higher demand for liquidity. Therefore, the correct answer is option 2) money demand to the right and increase the equilibrium interest rate.
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Answered by Anonymous | 2025-07-06

An increase in real GDP shifts money demand to the right, increasing the equilibrium interest rate. This occurs because a growing economy requires more liquidity for transactions. Therefore, the correct option is 2) money demand to the right and increase the equilibrium interest rate. ;

Answered by GinnyAnswer | 2025-07-06

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