What happens to the equilibrium quantity of money and equili

What happens to the equilibrium quantity of money and equilibrium interest rates if RGDP increases in the economy? O 1) Both equilibrium quantity of money and equilibrium interest rates rise 2) Equilibrium quantity of money rises and equilibrium interest rate falls 3) Equilibrium quantity of money falls and equilibrium interest rate rises 4) The quantity of money remains unchanged and equilibrium interest rates rise red 5) The quantity of money remains unchanged and equilibrium interest rates fall. rtfolio

Solution

Ans

Money level and s determined by Central Bank. It is independent value and does not change. But since gdp has risen transaction demand will rise. So interest rate will have to rise to reduce speculative demand for money. So 4 is right answer