An Increase in Real GDP Affects the Demand for Money

question 87

Multiple Choice

An increase in real GDP affects the demand for money because

• A) tax payments rise because more income is earned.
• B) there is an inverse relationship between the quantity of money demanded and nominal GDP.
• C) the larger real GDP, the higher the real interest rate.
• D) at the higher price level, it takes more dollars to make expenditures.
• E) when real GDP increases, more money is needed to make expenditures.

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Definitions:

Unenforceable Contracts

Agreements that, due to legal deficiencies, cannot be upheld or enforced by the courts.

Void Contracts

Agreements that are illegal or against public policy and therefore unenforceable by law.

Bilateral Contract

A contract in which the promise of one of the parties forms the consideration for the promise of the other.

Unilateral Contract

A contract where one party makes a promise in exchange for an act by the other party.