Sia
Question
Statistics
Posted 4 months ago
Which of the following scenarios will cause an increase in the demand for money in the money market?
Choose 1 answer:
(A) Nominal gross domestic product (GDP) decreases
(B) National income decreases
(c) The consumer price index (CPI) increases.
D The unemployment rate increases
(E) The demand for bonds increases
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Answer from Sia
Posted 4 months ago
Solution by Steps
step 1
To determine which scenario will cause an increase in the demand for money in the money market, we need to understand the factors that influence money demand
step 2
The demand for money typically increases with higher economic activity, higher prices, or higher interest rates
step 3
Analyze each option:
- (A) Nominal GDP decreases: This would likely decrease the demand for money.
- (B) National income decreases: This would also likely decrease the demand for money.
- (C) The consumer price index (CPI) increases: Higher prices generally increase the demand for money.
- (D) The unemployment rate increases: This would likely decrease the demand for money.
- (E) The demand for bonds increases: This would likely decrease the demand for money as people shift to bonds
Answer
C
Key Concept
Factors influencing money demand
Explanation
An increase in the consumer price index (CPI) indicates higher prices, which generally leads to an increased demand for money as people need more money to purchase goods and services.
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