Recession's Impact on the Money Market
In a recession, nominal GDP typically declines. What is the most likely alteration in the Money Market graph due to a recession’s impact on transaction demand for money?
A
The money supply curve shifts left, which increases the equilibrium interest rate.
B
The money demand curve shifts right as people hoard cash, thereby increasing the equilibrium interest rate.
C
The money demand curve shifts left, leading to a lower equilibrium interest rate and reduced quantity of money exchanged.
D
No shifts occur because the money market is unaffected by changes in nominal GDP.
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