Question

If the price level doubled and someone wanted to maintain the same level of purchasing power, the nominal quantity of money demanded must____________.a. also double.b. increase by 50%.c. stay the same.d. decrease.

Answer 1

Answer:

also double

Explanation:

To maintain the same purchasing power, if price doubles, nominal demand for money should double too.

For example, let us assume that the price of an apple is $2 And you purchase 10 apples every week. You pay $20. Price level now rises to $4. To be able to purchase the same quantity of Apples, you need to demand for $40. The nominal demand for money has also doubled.

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