An increase in total production (real GDP) causes the demand…

JAMB Economics 2023 175 views
Source: JAMB · 2023

An increase in total production (real GDP) causes the demand for money to ____and the interest rate to ______

  1. Increase; increase ✓
  2. Increase; decrease
  3. Decrease; decrease
  4. Decrease; increase
Explanation

When real GDP rises, people buy and sell more goods. They need more money for these transactions, so the demand for money increases.

With the money supply unchanged, higher demand for money pushes the interest rate up.

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