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If real GDP​ decreases: a. there will be a downward movement along the money demand curve. b. the money demand curve will shift to the left. c. there will be an upward movement along the money demand curve. d. the money demand curve will shift to the right.

Question

If real GDP​ decreases:

a. there will be a downward movement along the money demand curve.

b. the money demand curve will shift to the left.

c. there will be an upward movement along the money demand curve.

d. the money demand curve will shift to the right.

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Solution

The correct answer is:

b. the money demand curve will shift to the left.

A decrease in real GDP means that the economy is producing and selling fewer goods and services. This reduced economic activity leads to fewer transactions, which in turn decreases the demand for money. This decrease in money demand is represented by a leftward shift of the money demand curve. The other options (a, c, and d) do not correctly describe the relationship between real GDP and money demand.

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Similar Questions

In the long run, an increase in the money supply will lead toResponsesA  a decrease in velocity. a decrease in velocity.B an increase in velocity.an increase in velocity.C a decrease in real GDP.a decrease in real GDP.D an increase in real GDP.

Which of the following would indicate economic growth has declined?Elimination ToolSelect one answerAThe money supply curve shifts to the right.BThe long-run aggregate supply curve shifts to the left.CThe aggregate demand curve shifts to the right.DThe short-run Phillips curve shifts to the left.EThe money demand curve shifts to the left.

If the money supply increases, while prices and velocity remain constant, real GDP will:

If there is an increase in the nation’s money supply, the interest rate willmultiple choicerise, investment spending will fall, aggregate demand will shift right, real GDP will fall, and the price level will rise.fall, investment spending will rise, aggregate demand will shift right, and real GDP and the price level will rise.fall, investment spending will rise, aggregate demand will shift right, real GDP will rise, and the price level will fall.rise, investment spending will fall, aggregate demand will shift right, real GDP will rise, and the price level will fall.

If real GDP falls from one period to another, we can conclude thatNone of these necessarily occursnominal GDP fell.prices decreased.inflation occurred.

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