Which of the following statements is correct? Other things beingequal: a. A decl

Question

Which of the following statements is correct? Other things beingequal:



a. A decline in real output will shift boththe transaction demand curve for money and the total demand curveto the right.

b. A decline in the interestrate will shift the asset demand curve for money to the right, butleave the total money demand curve unchanged.

c. Deflation will shift boththe transactions demand curve for money and the total money demandcurve to the left.

d. Inflation will shift thetransactions demand curve for money to the right, but leave thetotal money demand curve unchanged.

Explanation / Answer

C Because of deflation (lower prices) less money is needed fortransactions, thus less money is needed in total.

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