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Macroeconomics

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Effects of an Increase in Velocity on the Money Market

MACRO-SKPBZ5

Suppose that the velocity of money rises. What are the effects on the nominal interest rate in the money market and the total amount of real money held by the public?

A

The nominal interest rate rises and real money held rises also.

B

The nominal interest rate rises and real money held falls.

C

The nominal interest rate rises and real money held remains unchanged.

D

The nominal interest rate falls and real money held rises.

E

The nominal interest rate falls and real money held falls also.

F

The nominal interest rate falls and real money held remains unchanged.

G

Both the nominal interest rate and real money remain unchanged.