The demand for money will fall if

Source: JAMB · 2023

The demand for money will fall if

  1. Real GDP rises
  2. Real interest rates rise ✓
  3. The GDP deflator rises
  4. People expect deflation soon
Explanation

Holding money costs you the interest you could earn elsewhere. When real interest rates rise, people keep less cash and put more into bonds and savings, so the demand for money falls.

Higher real GDP or a higher price level makes people need more money, not less.

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