The relationship between the quantity of real balances demanded and the rate of interest (called the demand for money curve) will ____ when GDP increases because _____.
A) increase (shift right); more transactions balances are needed to make purchases and to hold between pay periods
B) increase (shift right); more asset balances are needed for saving or precautionary reasons
C) decrease (shift left); fewer transactions balances are needed to make purchases and to hold between pay periods
D) decrease (shift left); lower asset balances are needed for saving or precautionary reasons
Ans: A) increase (shift right); more transactions balances are needed to make purchases and to hold between pay periods
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