Draw a demand for money curve. Label it
MD0.
Draw a demand for money curve that shows the effect of a decrease in real GDP. Label it
MD1.
Draw a demand for money curve that shows the effect of financial innovation that decreases the demand for money and that follows the decrease in real GDP. Label it
MD2.
When real GDP decreases, A- there is a decrease in the quantity of money demanded. The opportunity cost of money increases B. the quantity of money decreases C. there is an increase in the quantity of money demanded. The opportunity cost of money decreases D. a decrease in the demand for money occurs