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8 February, 03:51

Select an answer which correctly completes the following statements.

a. A decrease in real GDP causes a rightward shift of leftward shift of movement along the money demand curve.

b. An increase in technology which makes it easier to pay for goods and services without carrying lots of cash causes a the money demand curve.

c. A decrease in interest rates causes a the money demand curve.

d. An increase in the aggregate price level causes a the money demand curve.

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Answers (1)
  1. 8 February, 06:35
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    This question is incomplete and below is the updated version

    Select an answer which correctly completes the following statements.

    a. A decrease in real GDP causes a ( ...) the money demand curve demand curve.

    b. An increase in technology which makes it easier to pay for goods and services without carrying lots of cash causes a ( ...) the money demand curve.

    c. A decrease in interest rates causes a ( ...) the money demand curve.

    d. An increase in the aggregate price level causes a ( ...) the money demand curve.

    Answer:

    a. A decrease in real GDP causes a (leftward shift of) the money demand curve.

    b. An increase in technology which makes it easier to pay for goods and services without carrying lots of cash causes a (leftward shift of) the money demand curve.

    c. A decrease in interest rates causes a (movement along) the money demand curve.

    d. An increase in the aggregate price level causes a (rightward shift of) the money demand curve.

    Explanation:

    a. A decrease in real GDP leads to reduction in the demand for money and the contraction of the economy and thus causes a (leftward shift of) the money demand curve.

    b. An increase in technology which makes it easier to pay for goods and services without carrying lots of cash leads to a reduction in the desire to hold money and causes a (leftward shift of) the money demand curve.

    c. A decrease in interest rates leads to higher desire to hold wealth as there is less incentive to invest or save and this causes a (movement along) the money demand curve.

    d. An increase in the aggregate price level causes a greater demand for money and a (rightward shift of) the money demand curve.
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