Question

Higher nominal interest rates ______ the amount of money demanded and higher real income ______ the amount of money demanded.

Answer 1

decreases

increases

Step-by-step explanation:

Nominal interest rate is real interest rate plus inflation rate. If nominal interest rate rises, people would prefer to save their money and so the demand for money would fall.

Real income is income adjusted for price level changes. The higher the real income,the higher the purchasing power, the higher the demand for money.