Question

The transactions demand for money sometimes directly and sometimes inversely with nominal Gross Domestic Product (GDP). varies inversely with nominal Gross Domestic Product (GDP). varies directly with nominal Gross Domestic Product (GDP). has no relationship with nominal Gross Domestic Product (GDP).

Answer 1

Answer: Varies directly with nominal Gross Domestic Product (GDP).

Explanation:

The Transactions Demand for money refers to money that is kept by individuals, companies and even the Government to be able to purchase goods and services.

It varies directly with Nominal GDP because Nominal GDP includes inflation.

If Nominal GDP were to rise for instance, it would mean that Inflation has risen as well which means that people would need more money to be able to buy the now more expensive goods and services. This is an increase in Transactions Demand for money.

The reverse holds true signifying indeed that Transactions Demand for money varies with Nominal GDP.